The Court of Appeal in Commissioner of Inland Revenue v Jennings Roadfreight Ltd (in liq)  NZCA 455 discussed the payment of PAYE to the IRD in the context of the liquidation of an employer company (Jennings). The total PAYE unpaid by Jennings to the IRD on the date of liquidation was $49,889.90, although only $14,076.38 sat in the company bank account at that time.
When an employer has made PAYE deductions, section 167(1) of the Tax Administration Act 1994 (NZ) imposes a statutory trust over the deductions in favour of the IRD. The Court held that such a statutory trust continues to operate upon and during liquidation (overturning the High Court finding that such a trust is extinguished upon liquidation). Any such money held in trust will not form part of the estate of the employer company in liquidation and accordingly can be paid directly to the IRD without regard to the claims of other creditors.
However, when the employer has dealt improperly with any part of the PAYE deduction moneys (for example deducted PAYE, but neither paid it to the Commissioner, nor held it in the employer's bank account for payment), such unpaid tax is not subject to a trust under section 167(1) and forms part of the employer's estate in liquidation. Accordingly upon liquidation, the IRD is an unsecured preferential creditor for its claims over the balance of unpaid PAYE (less any amount recovered pursuant to a trust under section 167(1)).
See Court decision here.