How compensatory interest is applied.
About compensatory interest
Compensatory interest is charged to compensate the Crown for loss of use of money when duty is not paid in full and on time.
You will be charged compensatory interest if you fail to pay all your duty at the right time for any reason. This could include not paying by the due date, providing incorrect information to Customs or not entering your goods.
We may also charge penalties, in addition to compensatory interest, for the non-compliance that led to the duty not being paid. See Interest and penalties for unpaid duty for further information.
Compensatory interest is charged only when the amount owing (ie that which is subject to compensatory interest) is $1,000 or more. It is charged to the duty payer. See further details in the Customer Guide: Compensatory interest and late payment penalties (PDF 2 KB)
Compensatory interest is defined by formulas set in regulations, which are based on market interest rates. Current compensatory interest rates are shown in the table below.
The main rate aligns with that used by Inland Revenue. The reduced rate is based on the last 90 day bank bill rate published on the Reserve Bank website before 1 July. You may be eligible for the reduced rate if you voluntarily disclose an error and can demonstrate that it was inadvertent.
Table: Current compensatory interest rates
|When interest rate starts
|29 August 2023
|1 July 2023
Remissions and refund
The Act sets out the grounds for refund or remission of compensatory interest. You can apply for refund or remission using the form: NZCS 255 Application to remit or refund compensatory interest and/or late payment penalties (DOC 265 KB).
Continued assistance for duty payers affected by COVID-19, and new assistance for duty payers affected by the reduction of duty on motor spirits
Changes to the Customs and Excise Regulations 1996 come into force on Wednesday 11 May 2022. The changes will allow duty payers whose ability to pay duty on time has been significantly affected by COVID-19, or who had stock on hand at midnight on 14 March 2022 and were affected by the sudden reduction of duty on motor spirits on 15 March 2022, to receive a remission or refund on interest and penalties on late duty payments. The assistance for duty payers affected by COVID-19 is a continuation of assistance available from 25 March 2020.
To be eligible for a remission or refund on interest and penalties if a duty payer has been affected by COVID-19, the duty payer must meet the following requirements:
- the payment date for the duty is on or after 25 March 2022, or the interest accrued on or after 25 March 2022; and
- the duty payer’s ability to make a duty payment, including associated levies, on time having been significantly adversely affected by the COVID-19 outbreak; and
- the duty payer made contact with Customs as soon as reasonably practicable; and
- the duty payer has agreed with Customs when the duty will be paid, or has paid the duty in full (but the payment was late).
To be eligible for a remission or refund of interest and penalties if a duty payer has been affected by the recent reduction of duty on motor spirits, the duty payer must meet the following requirements:
- the payment date for the duty in respect of which the interest or penalty is (or was) payable relates to fuel stocks of the duty payer held in New Zealand immediately before the close of 14 March 2022; and
- in the case of interest, the interest accrued on or after 15 March 2022;and
- the duty payer’s ability to pay the duty before the close of the payment date is (or was) affected by the effects of the FED reduction on their cashflow; and
- the duty payer notifies Customs, before, on, or as soon as is reasonably practicable after the payment date, that they are or were not reasonably able to pay the duty before the close of the payment date for the reason specified above; and
- the chief executive is satisfied with the duty payer’s explanation; and
- the duty payer provides evidence satisfactory to the chief executive that they have lowered the amount that any person must pay them in relation to the fuel stocks by the same or a substantially similar amount as the FED reduction; and
- (g) either—
- the duty payer paid the duty (after the payment date); or
- the chief executive is satisfied that the duty will be paid as soon as practicable.
This assistance only applies to interest and penalties on late duty payments, the late core duty as agreed with Customs must still be paid.
If you're unable to pay duty on time due to the impact of COVID-19 or due to the impact of the 15 March 2022 reduction of duty on motor spirits, please contact Customs as soon as possible on firstname.lastname@example.org with your client code to discuss payment options.
You can read Customs’ FAQs for further information.
Assistance for duty payers affected by adverse weather events in January and February 2023
Some duty payers may be able to seek remission (or refund) of compensatory interest (amongst other support) if they have been affected by the adverse weather in January and February of 2023 – Cyclone Hale, Cyclone Gabrielle and other damaging weather in the areas affected by those Cyclones. See Weather event support (customs.govt.nz) for more details.
You can also read Customs operational policy for compensatory interest and late payment penalties.