COVID-19: IRD extends tax pooling deadline

COVID-19: IRD extends tax pooling deadline

COVID-19: IRD extends tax pooling deadline 1200 630 Lee Stace
Image: Hour glass

Updated 19 June 2020

Anyone impacted by COVID-19 will have 365 days after their terminal tax date to settle 2019 income tax arrangements with TMNZ, subject to meeting certain criteria.

IRD has used its new discretionary powers in s6I Tax Administration Act 1994 to extend the legislative deadline after recognising the cashflow difficulties some taxpayers face in the wake of the global virus and the Government’s response to it.

It means those with a terminal tax date of 7 April 2020 now have until 7 April 2021 to satisfy their Flexitax® or Tax Finance arrangements for the 2019 tax year.

Normally they have just 75 days after their terminal tax date to pay.

For taxpayers with a different terminal tax date, the extension to settle 2019 income tax will apply if their 75th day fell during a period that was impacted by COVID-19.

That means those with 15 January 2020, 7 February 2020, 7 March 2020 and 7 April 2020 terminal tax dates can request extra time to pay.

TMNZ welcomes IRD’s decision.

We wish to thank officials at the department for recognising the impact COVID-19 is having on our clients in relation to settling their 2019 income tax obligations within the required timeframe, as well as engaging with us to come up with a solution.

Eligibility criteria

The extension is subject to a taxpayer completing an application form and meeting a couple of conditions.

Firstly, they must have experienced – or expect to experience – a significant decline in actual or forecast revenue due to COVID-19 between January 2020 and July 2020 that either:

  • Prevents them from satisfying their existing arrangement for the 2019 tax year with TMNZ within the normal legislative timeframe; or
  • Meant that prior to this extension, they were unable to enter into an arrangement for the 2019 tax year with TMNZ.

If someone has received the Government wage subsidy, then this will satisfy the requirement of a reduction in revenue due to COVID-19.

If they have not, they will need to confirm that, after meeting their on-going business expenditure, they DO NOT have any of the following immediately available to pay their tax obligation:

  • Cash reserves
  • Insurance proceeds
  • Banking facilities.

Secondly, a taxpayer must have their TMNZ arrangement for the 2019 tax year in place on or before 21 July 2020. Our recommendation is that you set this up as soon as you can.

Thirdly, they will need to supply a cashflow forecast (or other comparable information if they are a small business).

IRD is asking us to collect and check this forecast as it wants proof that the taxpayer requesting an extension will have the funds available to meet their liability within the new timeframe.

Someone must supply this forecast even if they received the wage subsidy.

Many clients and tax agents will be able to access this through their accounting software. If someone does not have a cashflow forecast template, here is one that IRD sends those wishing to enter into a payment plan.

Exception to the cashflow forecast criteria

If a taxpayer intends to settle their tax liability before 21 July 2020, they DO NOT need to provide a cashflow forecast.

Payment frequency

We CANNOT accept arrangements to delay the payment of all your outstanding tax until the last day.

IRD wants taxpayers to make regular payments towards their liability. These payments can be made weekly, fortnightly or monthly.

Please contact us if you have circumstances that will make this difficult.

We can vary arrangements part way through if required.

A taxpayer’s final payment must be received no later than 365 days past their terminal tax date for the 2019 tax year.

TMNZ’s interest rates for extension arrangements are the same as they are for other transactions.

Key dates to note

The 365-day extension deadline will differ slightly for taxpayers with the terminal tax dates in bold. Please be mindful of this when completing the application form.

For those whose terminal tax date for the 2019 tax year is 15 January 2020, 365 days after this date is actually 14 January 2021.

This is because 2020 has an extra day due to being a leap year.

For those whose terminal tax date for the 2019 tax year is 7 February 2020, their actual 365th day is 9 February 2021.

There are two reasons for this.

The first is that 7 February 2021 falls on a Sunday. The second is Waitangi Day (6 February) is ‘Monday-ised’ to 8 February.

For those whose terminal tax date for the 2019 tax year is 7 March 2020, their 365th day is 9 March 2021.

This is because:

  • The due date for this 2019 terminal tax payment defaulted to 9 March 2020 as the seventh was on a Saturday this year; and
  • IRD has applied the 365-day extension from 9 March 2020.

The application process

You can find the extension application form here. Please complete and send this along with your cashflow forecast to support@tmnz.co.nz.

Someone can send us the completed application form immediately and provide the cashflow forecast in the next three weeks.

Don’t hesitate to call

The process around this extension has been introduced at short notice, so please bear with us.

As always, if you have any questions, feel free to contact your TMNZ account manager or our customer support team. We’re here to help.

Disclaimer: This article is correct as at 19 June 2020. It is subject to change. TMNZ will update this article as and when it receives new information from IRD regarding the extension of the 2019 tax pooling deadline. We encourage readers to check this page regularly.

Lee Stace

Lee Stace is the PR and Content Manager at Tax Management NZ.

All posts by: Lee Stace

X