A $50 million pool of cheaper finance for cash-limited Canterbury firms to pay provisional tax obligations is being offered by Tax Management New Zealand.
The tax finance firm, the pioneer of “tax pooling”, announced the fund of money available for local firms last night at a 10th-year birthday dinner in Canterbury.
Chief executive Chris Cunniffe said the $50m fund was specifically for Canterbury companies and was at 5.75 per cent interest rate which was 1.5 to 3 percentage points cheaper than its other rates around New Zealand.
“We are just making this a one-off contribution to Canterbury.”
The fund was being financed by investors and would be held for Canterbury business taxpayers. It was available for provisional tax payments due between May 7 this year and July 28.
Cunniffe said a group of companies in Canterbury was starting to prosper from the rebuild but cashflow was a challenge.
The 5.75 per cent rate was “much much cheaper” than standard overdraft rates which were “double digit” and also lower than general business banking rates. The minimum Tax Management would provide for provisional tax instalments was $10,000 and it was available for a 10-month maximum.
He said the initiative followed feedback from its accounting clients in Canterbury, saying that a group of companies starting to do quite well from the rebuild wanted to reinvest in their businesses but had tax to pay.
“You just have this cashflow squeeze.”
Cuniffe said that at a function the company held this week the same message came from the commissioner of inland revenue “that cashflow is now the challenge for Canterbury business”.
Tax Management is the largest provider of “tax pooling”, a risk management tool, where it takes income tax overpaid by large employers and uses tax pooling to transfer that mostly to small taxpayers who have not paid enough provisional tax. Large employers receive interest on the overpayments.
Grant Thornton tax partner Geordie Hooft said the company had a lot of clients using tax pooling. It was not only for struggling companies but companies doing unexpectedly well with profit but who did not have enough cash around to pay their tax because they were reinvesting the cash in the business.
Money could be loaned from a bank to pay provisional tax but companies had to go through a lot of hoops to get it, he said.
LIFT FOR CANTERBURY TAX MANAGEMENT NZ OFFERS: $50m tax fund for Canterbury companies to pay provisional tax. For tax instalments due between May 7 and July 28.