An introduction to tax pooling

No more provisional tax stress

TMNZ Tax Pooling gives you the flexibility to pay provisional tax at a time that suits your business and at a much lower interest cost than what IRD charges for unpaid tax and without incurring late payment penalties.

If you need cashflow flexibility, there is no better solution than tax pooling with TMNZ.

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About tax pooling

  • The IRD-approved system of tax pooling has operated in New Zealand since rules for tax pooling and Government legislation were passed in 2003. Tax pooling was established to reduce the taxpayer’s exposure to Use of Money Interest (UOMI) and to offer a more flexible means of paying provisional tax.

    If you are an accountant working on behalf of taxpayers interested in using the tax pool system, TMNZ can help as an approved tax pool intermediary. IRD only accepts approved tax pooling companies and TMNZ is the largest and industry-leading tax pooling service provider.

  • Tax pooling enables you to deposit your provisional tax payments into an account held by an IRD-approved intermediary. Payments are date stamped which is why IRD treats it as being paid on time once the transfer from the tax pool to the taxpayers’ IRD account has been made.

    Basically, the system gives you the option to pay into the tax pool when it suits you, instead of paying the IRD directly. Once you have deposited the payments into the tax pool, the intermediary will hold these funds in the account until you instruct them to transfer the money into your own IRD account. The payment will be considered “tax paid” once this transfer is made.

  • Tax pooling works by having a taxpayer deposit money with a tax pooling intermediary on its provisional tax dates, rather than paying it directly to the IRD. These payments are deposited by the tax pooling intermediary into a tax pooling account at the IRD.

  • For a person to act as an official tax pooling intermediary, they first must be approved by the IRD. The commissioner of the IRD must agree that the applicant meets the legislated criteria and is fit to operate a tax pool. Once the applicant is officially approved, they are given their own tax pooling account with the IRD.

    Approved tax pooling intermediaries are legally required to protect the taxpayer’s payment details and personal information. This is a key rule stated within the legislation. This is why all payments to TMNZ go into trust accounts administered by Guardian Trust, New Zealand’s largest corporate trustee, which also oversees the TMNZ tax pool account at IRD.

    TMNZ is the leading tax pooling intermediary in New Zealand and was the first ever tax pooling service approved by the IRD. TMNZ has set the standard for reliable, secure tax management, with the high-security systems in place to protect client’s funds. With innovative solutions and a dedicated team on deck, TMNZ is a top choice for business owners across the country. If you are interested in taking advantage of tax pooling, contact TMNZ today.

  • Tax pooling provides numerous benefits for taxpayers. The simpler, stress-free system has helped business owners successfully manage their provisional tax obligations for many years. It’s a better, easier way to pay tax.

    The greatest advantage of depositing into a tax pool is flexibility. Tax pooling allows you to make provisional tax payments when it best suits your business cash flow, giving you and your clients greater control over tax and also helping save time in the long run. Ultimately, you decide how to make tax work for you and clients.

    Tax pooling also saves you interest costs and completely erases the risk of payment penalties, including underpaid, missed or future provisional tax payments. You won’t have to worry about late payment penalties related to tax audits either, as you will have cover from the tax pool.

  • If you are a taxpayer unsure about how much income tax to pay during the year, you run the risk of underpaying tax. This is because your provisional tax is only based off an estimation of annual profit.

    If you have underpaid tax due to an incorrect judgement of your liability, you may be exposed to UOMI. Conversely, if you have overestimated the amount of tax you have to pay, the money you could be using for your business could be tied up at the IRD, earning less return. Either situation can place you at a financial disadvantage.

    But tax pooling offers a solution for overpaying or underpaying tax. The arrangement allows you to balance overpayments by underpayments within the same pool, which will subsequently reduce costs related to UOMI exposure.

  • Various types of payments can be made to a tax pooling account. This includes voluntary provisional tax payments or normal provisional tax instalments, reassessments of income tax, deferrable tax and agreed delay tax. Payments can also be made for meeting increased obligations or reassessments of income tax revenue. However, tax pooling cannot be used for meeting regular tax payments where the amount due is known, such as PAYE or GST.

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