Taxpayers with volatile income can now protect themselves in advance from the risk of incurring hefty IRD late payment penalties and use of money interest (UOMI) if they have a better-than-expected financial year.
Tax SHIELD™, a new product from Tax Management NZ (TMNZ), lets taxpayers put an arrangement in place whereby they pay an upfront fee to cover the portion of their income that is volatile, says the tax pooling intermediary’s chief executive Chris Cunniffe.
Volatile income can mean tax is underpaid and results in late payment penalties of up to 20 percent per annum and UOMI of 8.4 percent.
However, using Tax SHIELD™ means that in the event a taxpayer earns the extra income, and therefore has a higher tax bill, any late payment penalties and UOMI incurred up to the amount of tax covered will be eliminated when they pay the principal and an exercise fee.
“Our clients tell us their biggest worry is the hefty late payment penalties and use of money interest they are charged if they get their provisional tax wrong because it can undo all the hard work that has driven their increased profitability,” says Mr Cunniffe.
“Having listened to their concerns, we have developed Tax SHIELD™ to remove the anxiety of late payment penalties and UOMI.”
With Tax SHIELD™, the amount of tax set aside for taxpayers is ‘date-stamped’ and held in an IRD account administered by the Guardian Trust, says Cunniffe.
Late payment penalties and UOMI are eliminated because the IRD treats the tax as being paid on time when it is transferred to an individual taxpayer’s IRD account.
Mr Cunniffe says the very low upfront fee makes Tax SHIELD™ ideal for those taxpayers whose income is difficult to predict and are concerned about exposure to IRD late payment penalties and UOMI of up to 28 percent.
“Taxpayers can now be secure in the knowledge that TMNZ will eliminate any potential IRD penalties and interest they will incur if their tax bill is greater than expected.”
Taxpayers can secure cover using Tax SHIELD™ at their next provisional tax date up until 7 February, 2016.
TMNZ is New Zealand’s largest and oldest tax pooling company, and developed all the tax pooling products in the market.
It has helped more than 27,000 clients save more than $160 million in IRD compliance costs since 2003.
TMNZ’s founder director Ian Kuperus not only came up with the concept of tax pooling, but also helped the IRD implement the tax pooling framework in New Zealand.