Paying provisional tax into the TMNZ tax pool account at IRD is something you may wish to consider if you are due to pay on 28 November or 15 January.
Many of you will be familiar with how Tax Management NZ (TMNZ) gives you greater control over your upcoming provisional tax payments, and can reduce compliance costs if you have underpaid your income tax or received a notice of reassessment from IRD.
However, as you start planning for provisional tax due on 28 November or 15 January, one option you may wish to consider is making your payments into the TMNZ tax pool account at IRD rather than directly into your own IRD account.
You still have the flexibility of choosing how and when you make your income tax payments, but also get access to some other advantages including:
- Potential to earn more interest on surplus tax than what IRD pays if provisional tax is overpaid.
- Faster refunds – within three to five days and without having to file a return.
- Preferential, discounted rates.
- Deposits held in the tax pool can be used as collateral to drawdown short-term funds at very attractive rates.
- Make one deposit for a group of entities and arrange distribution once you have finalised your returns.
Protection from risk and complete visibility
On your provisional tax dates, you make your payments into a bank account administered by an independent trustee, Guardian Trust. Guardian Trust also oversees the TMNZ tax pool account at IRD in which your date-stamped payments are held. At no stage does TMNZ have access to your funds.
You can view your account online and request that any amounts held in the tax pool be transferred to your IRD account at any time.
Why you should pay provisional tax this way
This can be a valuable addition to your risk management strategy if you experience volatile/seasonal income or pay substantial amounts of provisional tax.
It will also provide benefits when the new provisional tax rules come into effect next April as making these payments into TMNZ’s tax pool allows you to use the standard uplift method to cap your liability while retaining the ability to earn interest on your surplus tax if the actual amount due ends up being less.
There are no fees to deposit your provisional tax payments into the TMNZ tax pool account.
Talk with your accountant if you wish to know more.