By now you will have notified those clients who have terminal tax to pay for the 2016 income year on 7 April.
Terminal tax is the downside of having a better-than-expected financial year and, in some ways, is aptly named because it can be, er, terminal to cashflow.
Informing clients that they owe even more tax is not always a pleasant conversation to have. In fact, it’s a scenario which can paint you as the villain.
However, you have an opportunity to be the hero at the same time.
Tax Management NZ (TMNZ) can help clients manage their 2016 terminal tax obligations.
If there is IRD interest owing on the terminal tax, we can reduce this by up to 30 percent and eliminate late payment penalties if your clients settle what they owe through us.
In the event paying terminal tax on the date it is due is going to be problematic, your client can defer this payment for up to 75 days past their terminal tax date by using TMNZ. That means those with a 7 April terminal tax date have until mid-June to pay.
Your clients can pay TMNZ in one lump sum or via instalments.
Below is an example which show the estimated savings of settling 2016 terminal tax liabilities via TMNZ.
A business has 2016 terminal tax due on 7 April because of unpaid provisional tax of $15,000 that was originally due on 28 August 2015. This liability has also incurred late payment penalties.
Cost of paying directly to IRD in February: $20,605
Cost of paying through TMNZ in February: $16,462
Estimated savings provided by TMNZ: $4143 in IRD interest and late payment penalties
If the business wished to settle this in mid-June, it would cost $16,731 to pay through TMNZ – a saving of $5006 in IRD interest and late payment penalties.
What if my clients have a 7 February terminal tax date?
Don’t worry – your clients can still settle 2016 terminal tax obligations through TMNZ if they have a 7 February terminal tax date. They have until mid-April to do so.
If you are an existing user, sign in to transact right away. Those new to TMNZ can register, email email@example.com or phone 0800 829 888 to get a quote.