HOW TO USE TAX POOLING

Apr 27, 2021

PAY YOUR INCOME TAX HOW AND WHEN IT SUITS YOU

Tax Management NZ (TMNZ) provides an IRD-approved service that gives small businesses greater flexibility to do tax on their terms by letting them choose how and when they make their income tax payments.

UPCOMING PROVISIONAL TAX PAYMENTS

Generally, you’ve got to pay provisional tax on the 28th of August, 15th of January and the 7th of May each year. But what if you don’t have the money at the time?

Option 1: Deal with IRD direct.  They’ll charge you interest of approx 8% p.a.  Plus, you may have to pay penalties from the third provisional tax date. Then interest on penalties. Ouch!

Option 2: Pay IRD via TMNZ. They’ll charge you interest too, but at a much lower rate. You pay when you want to. And when your tax is on-paid to IRD, IRD views this tax as being paid on-time!

UNDERPAID YOUR INCOME TAX?

Fear not. If you owe provisional tax at terminal tax time you have up to 75 days past your terminal tax date (either 7 March or 7 April usually) to settle your liability. ​In the case of IRD reassessments of prior years’ tax you have up to 60 days from the reassessment notice date. 

HOW DOES IT WORK?

Tax pooling is an IRD approved service that helps businesses make the right tax payments at the right time.

So instead of paying IRD directly, taxpayers pay into the tax pool when it suits them and TMNZ makes payments to IRD on their behalf. It’s like a balancing act; since some businesses like to overpay tax during earlier dates, this helps to cover those businesses that need more flexible tax payment arrangements. And that’s the tax pool.

FEATURES & BENEFITS

  1. Match provisional tax payments to your cashflow cycles, meaning improved cashflow for your business
  2. Free up working capital. Use your funds to reinvest in your business now, and pay your provisional tax when you want
  3. Maintain your credit record.  TMNZ tax pooling does not affect existing lines of credit and approval is guaranteed
  4. Pay in flexible or fixed installments. This gives you flexibility if the unexpected arises
  5. Competitive interest rates. TMNZ rates are generally at least 30% cheaper than IRD rates

More info here

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