TMNZ is Now a Partner of Live Ocean
On Thursday, 15 October 2020 TMNZ announced a new partnership with Live Ocean. The announcement at Akarana Yacht Club, where TMNZ used to have their HQ and Live Ocean founders Blair Tuke and Peter Burling first sailed a 49er, aims to turn around some pretty worrying stats about the state of our ocean by accelerating positive ocean action in New Zealand. 94% of New Zealand’s area is ocean, and like business, ocean health is a cause that deserves and demands our leadership.
The story of giving for TMNZ and its founder isn’t new. After pitching the idea of tax pooling to various governments for almost 20 years, Ian and Wendy decided to ‘take the helm’ and mortgage their home to get the industry and TMNZ started in 2003. Since then they have continued to support people and causes that make a difference to the lives of others in NZ. Partnering with Live Ocean is one entry amongst a growing list where all profits are committed to charity each year.
Ian has always had an interest in sailing and saw first-hand the positive impact that Team New Zealand had in Valencia, San Francisco and Bermuda. He was impressed by Peter and Blair, who at the top of their sport, want to find time to make the world a better place. Partnering with them seemed almost fated.
When asked what the support of TMNZ means for Live Ocean, Peter said “So little of our Ocean is protected, 90% of our seabirds are at risk. This helps us fund projects that reverse these trends”.
As a foundation partner of Live Ocean, we see the potential to unlock capability and funding for ocean conservation in New Zealand. When our people are at work, they know they’re helping build a better New Zealand.
To learn more about Live Ocean and the work they are doing visit liveocean.com
Anti-money laundering requirements and tax pooling
Tax Management NZ (TMNZ) must now conduct a limited form of customer due diligence on all clients as part of recent changes to anti-money laundering (AML) requirements.
As such, we will be collecting information about the taxpayers using our service and asking anyone acting on their behalf to supply some basic personal details.
We also need to see evidence that a taxpayer has an actual or expected liability at Inland Revenue (IR) before we transfer tax from our tax pool.
Transactions cannot be completed until we receive this information from you.
Information we require from a taxpayer
For a company, limited AML requires us to collect and hold information about them that is publicly available. We will obtain this information ourselves from the New Zealand Companies Office. You don’t have to do this.
For an individual or a trust, we only need information from a person acting on their behalf (see below).
What person acting on behalf means
As part of the limited AML requirement, TMNZ must collect the identity information from at least one individual who has the authority to act on behalf of a taxpayer using our service.
For tax agents, this can be either of the following:
- A partner, director or owner of your firm; or
- An agent at your firm who is linked to the taxpayer (e.g. the taxpayer’s accountant). It can also include the person who entered the transaction for the taxpayer or the person who receives email correspondence regarding the taxpayer’s transaction if this person is different from the accountant.
For a taxpayer, this can be ANY of the following:
- The taxpayer themselves, if they are an individual.
- An employee who has authority to act on behalf of the taxpayer (if they are a company).
- A trustee of the taxpayer (if they are a trust). We require a copy of the trust deed to ensure this person has authority to act.
The person above requires a TMNZ dashboard login and must either have visibility to view all taxpayers registered with your accounting firm or be linked to the specific taxpayer or transaction. This is not applicable if the taxpayer is an individual or the person acting on behalf is a trustee.
You have the option of supplying the tax agent or taxpayer identity information as part of limited AML.
Identity information we require from a person acting on behalf
TMNZ must collect the following identity information as part of the limited AML requirement if you are a person acting on behalf of the taxpayer:
- Your full legal name.
- Date of birth.
The above is required under section 15 Anti-Money Laundering and Countering Financing of Terrorism Act 2009.
Any personal information TMNZ holds about you or your clients is stored on a secure system that has been penetration tested to ensure this data will not be compromised.
Confirmation of tax liability
The limited AML requirement means TMNZ must also ascertain that a taxpayer using our service has a liability or expects to have a liability with IR before we can complete their transaction.
Proof of this can be in the form of:
- Written confirmation from a tax agent that the taxpayer is expecting to have a liability at IR. (This can be an approximation if the exact figure is not known at the time.)
- A copy of the taxpayer’s myIR transaction detail report for the relevant tax year.
- Standard uplift amounts determined from prior year RIT information. Prior year RIT information must be determined from copies of IR correspondence or written confirmation from a tax agent.
- A copy of any provisional tax estimate submitted to IR by the taxpayer.
- Any correspondence from IR showing a liability to pay in respect to the relevant tax year.
We only require confirmation of a taxpayer’s liability when we transfer funds from the tax pool to their IR account.
Does the information provided need to be verified?
A partial exemption granted to the tax pooling industry means there is no need for TMNZ to carry out the verification requirements that apply under full AML.
In other words, we do not need you to provide copies of documents to substantiate the information you provide.
Full AML, including verification, is still required for refunds or sales that meet our policy thresholds.
AML has been around for a long time – why are you asking for this information now?
Previously, TMNZ only carried out AML if a taxpayer was requesting a refund or sale over a certain amount from the tax pool.
However, our AML regulator – the Department of Internal Affairs (DIA) – is making tax pooling providers hold more information about every taxpayer using our service and anyone with authority to act on their behalf.
This limited AML requirement from DIA is in response to the accounting profession being brought into the AML regime. It has been in effect since 1 July 2020.
As a reporting entity captured under the Act, TMNZ must comply with the AML regulations set out in the legislation and any other requirements issued by DIA.
Please feel free to contact us if you have any questions. We’re happy to help.
Updated 12 October 2020
Disclaimer: This article is correct as at 12 October 2020. It is subject to change.
How filing late and losing EOT impacts provisional tax payments
Losing extension of time (EOT) due to filing income tax returns late means someone can only use 105 percent of the previous year's residual income tax (RIT) when calculating their provisional tax payments.
That's because if a taxpayer fails to provide their returns(s) on time, Inland Revenue's (IR) system defaults to using the date by which they were legally due to file the return for that year – not the date on which they furnished the return.
Only if someone files their return(s) within the required timeframe will the actual date of filing be used.
This is important to remember, particularly when using TMNZ’s Tax Calculator.
An overview of IR's system and TMNZ's Tax Calculator
When a taxpayer files their return for the most recently completed year, IR’s system uses the lesser of standard uplift or a third of their RIT to determine the provisional tax instalment amounts due and payable for that year.
As per s120KBB (3B) Tax Administration Act 1994, the standard uplift instalment can either be the lesser of the 105 percent or 110 percent calculation. You can read more about that here.
TMNZ’s calculator follows the same logic as IR's system.
To determine the instalment amounts due and payable, it requires a taxpayer's RIT and filing date information for the past three years:
- The current tax year or most recently completed tax year (e.g. 2020).
- The tax year prior to that (e.g. 2019).
- The tax year two years prior to that (e.g. 2018).
Whereas IR has access to this information, we unfortunately don't. That's why we ask users to enter these details themselves.
If someone was late in providing a return and lost their EOT in any of the years before the current or recently completed tax year, then it’s crucial they know the correct filing date to use, otherwise the calculator will spit out incorrect instalment amounts.
After all, garbage in, garbage out.
Example
A taxpayer with a 31 March balance date decided to use TMNZ’s Tax Calculator to work out the provisional tax payable for the 2019 tax year. They did not pay any income tax for that year and wanted to purchase it from TMNZ to reduce their interest cost and eliminate late payment penalties.
RIT and filing date information for the past three years
| Tax Year | RIT | EOT | Legal date by which they must file their return | Date they file their return | Return status |
| 2017 | $6000 | Yes | 31 March 2018 | 1 May 2018 | Late |
| 2018 | $10,000 | No | 7 July 2018 | 16 January 2019 | Late |
| 2019 | $25,000 | No | 7 July 2019 | 30 June 2019 | On time |
As you can see, the taxpayer has lost their EOT for the 2018 tax year due to filing their 2017 return late. Their 2018 return was also late, so they don’t have EOT for their 2019 tax year either. However, the taxpayer did file the latter year’s return on time.
This means when using TMNZ’s Tax Calculator they must enter into the ‘date of filing’ field the respective legal dates by which they were required to furnish the returns for the 2017 and 2018 tax years.
For the 2017 tax year, this will be 31 March 2018 as their EOT was still applicable. For the 2018 tax year, this will be the non-EOT deadline of 7 July 2018.
Legislation states anyone who has an early balance date (i.e., the period between 1 October and 31 March) must file their return by 7 July if they do not have EOT. Those without EOT who have a late balance date (i.e., the period between 1 April and 30 September) must file their return on the seventh day of the fourth month after their year-end.
As the 2019 tax return was provided within the mandatory timeframe, the taxpayer can use the actual date on which they submitted that year’s return to IR.
Recap: How things should look in TMNZ’s Tax Calculator
| Tax year | RIT | Date of filing |
| 2017 | $6000 | 31 March 2018 |
| 2018 | $10,000 | 7 July 2018 |
| 2019 | $25,000 | 30 June 2019 |
How this impacts provisional tax instalments
In this situation, the 2019 provisional tax instalments will be based on the standard uplift amount as this is lower than a third of the RIT for that year.
However, ALL uplift payments will be based on 105 percent of the 2018 RIT.
That’s because the taxpayer lost EOT for the 2018 tax year and, therefore, was supposed to have filed their return for that year on 7 July 2018 – before the date of their first provisional tax instalment for the 2019 tax year (this being 28 August 2018).
As such, they cannot base any payments off 110 percent of their 2017 RIT.
Therefore, the 2019 instalment amounts due and payable as per IR's system – and what TMNZ's Tax Calculator will tell them to purchase – at each date are as follows:
- 28 August 2018: $3500
- 15 January 2019: $3500
- 7 May 2019: $3500
TMNZ's calculator will also show the taxpayer needs to purchase at their terminal tax date the final balance of $14,500 to settle the 2019 RIT, as their RIT is less than $60,000.
Please note the terminal tax date will have been 7 February 2020 due to them losing their EOT. They would have had 75 days from this date to purchase from TMNZ the 2019 income tax they require.
Don't forget the flow-on effect
It is also important to remember that because there was a requirement to file the 2019 return by 7 July 2019, the taxpayer can only use the 105 percent uplift calculation for their 2020 provisional tax payments.
Again, this is due to the filing date for the 2019 return being before the first instalment date for the 2020 year.
So, using the RIT information above, the standard uplift payments for the 2020 tax year will have been:
- 28 August 2019: $8750
- 15 January 2020: $8750
- 7 May 2020: $8750
For those using the standard uplift method, the 105 percent calculation will continue to be the only option for them to determine provisional tax payments until the taxpayer re-applies for their EOT.
Legislative references
You can find the legislation pertaining to filing dates of tax returns and EOT in s37 and s38 Tax Administration Act 1994.
Please feel welcome to contact us if you have any questions.
Harrison Grierson mitigates provisional tax risk
For Matthew Fleming, provisional tax is risky business as it requires a degree of crystal-ball gazing and guesswork.
However, he chooses to mitigate that risk by depositing these payments into TMNZ's tax pool.
It's a “no-brainer” because it gives him a better return if he overpays provisional tax and reduces his interest and late payment penalty costs if he underpays.
More about Matthew Fleming
Matthew is the chief financial officer at Harrison Grierson, one of New Zealand’s leading engineering and design consultancies.
It has offices throughout Aotearoa and predominately provides services locally, with more than 350 staff on the books.
Remarkably, the firm is blowing out 135 candles this year. No one stands the test of time for that long if they ain’t good at what they do.
And Harrison Grierson is good at what it does. A quick peruse of the significant projects it has been associated with during its lifetime is a testament to that.
Provisional tax is 'difficult to predict'
However, like most businesses, it is not immune to the problems provisional tax poses.
Matthew admits calculating the amount of income tax Harrison Grierson must pay Inland Revenue (IR) requires guesswork as its cashflow is up and down at certain times.
He knows the lay of the land during the first quarter – but the rest of the year can go either way.
Matthew says:
“It’s hard enough to try and guess next month’s results, but when you’re having to guesstimate your final year’s tax liability accurately, [it] does take a certain degree of crystal-ball gazing. We try to project our income and where our costs are going to be and having to pay tax on that sort of basis is a little bit of a risk.”
Even more so when one considers the taxman’s wide interest spread. As at the time of writing, they charge 8.35 percent if someone underpays provisional tax and pay just 0.81 percent if they overpay.
In other words, provisional tax is difficult to get right and very expensive when someone gets it wrong.
How Matthew manages that risk
Matthew chooses to deposit Harrison Grierson's provisional tax payments into TMNZ's tax pool.
It's an account operated by an IR-approved tax pooling provider that allows taxpayers to combine their payments. The overpayments from some can then be used to offset the underpayments by others.
TMNZ's tax pool account sits at IR and is overseen by an independent trustee.
Harrison Grierson keeps its date-stamped tax deposits in this account until Matthew confirms its liability for the year. He then arranges for the transfer of these deposits to the firm's own IR account to satisfy what they owe.
If they have surplus tax remaining, he can earn additional interest by selling this to someone who has underpaid (subject to market demand).
Conversely, if not enough tax has been paid, Matthew can reduce the IR interest cost and eliminate any late payment penalties Harrison Grierson faces through purchasing the tax they require from another taxpayer and applying it against the company’s own liability when he arranges their transfers from the pool.
Matthew: 'TMNZ makes provisional tax easier'
Matthew is a big proponent of the benefit TMNZ delivers when his provisional tax calculations go askew.
He says:
“[Tax pooling’s] such a great service in terms of advantaging taxpayers when they are trying to estimate their liabilities and are struggling with it. The ability to get a return when you have overpaid and the ability not to pay such punitive penalty rates when you have underpaid makes it a no-brainer.”
As someone who is having to estimate revenue and costs a lot, Matthew finds it useful that tax pooling gives him the flexibility and control to make payments “as we see fit” based on how the financial year is unfolding, without any considerable downside.
He also likes that he can access refunds faster – and without having to file a return. TMNZ makes it simple for him to manage the payments of the different entities belonging to Harrison Grierson as well.
Matthew recommends tax pooling to other businesses, particularly those with seasonal or volatile income.
“What makes TMNZ an easy choice is it makes the whole provisional tax regime easier to deal with.”
Contact our team to learn how you too can take advantage of tax pooling.
Coffee with Tsarina at Shore Accounting Solutions
Tax pooling is part of the strategy Shore Accounting Solutions employs to assist businesses with managing cashflow and provisional tax payments.
Tsarina Dellow is a chartered accountant at the two-person firm in Amberley, 45 minutes north of Christchurch.
She says paying provisional tax on dates Inland Revenue (IR) prescribes can be hard on small- and medium-sized businesses’ cashflow. That’s particularly the case during the January to May period, when the department awaits payment of two provisional tax instalments (not to mention GST).
Xero’s Small Business Insights reveal January and May are two of the most difficult months in terms of cashflow. August is another. (See a pattern here?)
Tsarina says business owners can come unstuck in this period – particularly if they’re guilty of not squirreling cash away throughout the year.
“Kiwis are often quite bad at saving. They’re not very good at putting money away in the good times, so when they have a bit of a bump – maybe a customer pays late or a supplier puts their costs up – they don’t often have that buffer there. When you don’t have that buffer, things start to go downhill and it gets really stressful for people really, really fast.”
Enter TMNZ
As an IR-approved tax pooling provider, TMNZ allows businesses to make their provisional tax payments when it suits them.
There is no need to worry about late payment penalties. And the interest it charges is fairer than what IR charges when they miss a payment.
Tsarina mentions this service to clients when discussing tax planning and cashflow management if she notices they’re going to encounter any difficulty at certain times of the year.
“If [TMNZ] can help them out with that, we can set a programme in place to even things out during the year,” she says.
“It delivers excellent benefits for people’s cashflow. They’re able to pay their tax as and when it suits them and their business – and they don’t have to worry about the IR always chasing them up. If they can’t meet a provisional tax payment, they can hand it over to TMNZ and pay it when they can.”
About Shore Accounting Solutions
Tsarina has been working at Shore Accounting Solutions for four years. Her colleague Ben Shore founded the firm in 2012.
The duo is big on providing great, technical tax advice and helping North Canterbury businesses and the community grow.
Provisional tax relief during tough times
As businesses look to conserve cash in response to drought, flooding or COVID-19, there's an IR-approved way to defer payment of their 2020 provisional tax until June next year.
Tax pooling lets taxpayers pay provisional tax at a time that suits their business, without facing interest and late payment penalties from the taxman.
Why might this be useful?
For most businesses, provisional tax will be calculated at 105 percent of the preceding year’s income tax liability.
But with recent adverse weather events in some parts of New Zealand, profitability may in some cases be less than forecast and some will not wish to pay based on this calculation. Others may also wish to hold on to funds to manage their cashflow at this uncertain time.
How tax pooling helps
A commercial tax pooling provider such as TMNZ can offer some respite.
It allows someone to pay provisional tax at a time that suits their business. You will only have to pay what you owe Inland Revenue (IR), not some amount calculated by reference to prior years which may be well in excess of your 2020 liability.
Using a tax pooling provider means those due to pay provisional tax on 28 February, 28 March or 7 May 2020 would have until 21 June 2021 to pay.
There is some interest to pay when using the service, but this is much cheaper compared to what IR currently charges (check latest use of money interest rates here) when a tax payment is missed or underpaid.
Things to know about tax pooling
- Tax pooling providers are approved by and registered with IR and operate under legislation found in the Income Tax Act 2007 and Tax Administration Act 1994. The service has been operating in New Zealand since 2003.
- Any payment made to a tax pooling provider is made into a bank account administered by an independent trustee. This independent trustee also oversees a tax pooling provider’s account at IR.
- There is no requirement to provide any security or financial information to use the service.
- Tax pooling cannot assist with GST or PAYE. It’s important to stay on top of these tax obligations during this time.
How tax pooling works
Say you have a provisional tax payment of $30,000 due in March 2020. With the uncertainty given recent events, you would rather not pay this right now if it can be avoided.
If you let TMNZ know about your position, we can make a tax deposit of $30,000 into our IR account on 28 March 2020 on your behalf. This deposit is date stamped as at the date that it is made.
TMNZ will also tell IR you are using tax pooling to pay your tax and IR will enter a note in its system telling its debt collection team not to pursue the outstanding payment.
Once you file the tax return and know the liability for the year, you pay the tax pooling provider. This payment must be settled before your terminal tax date. Your payment includes the core tax of $30,000 plus the provider’s interest cost.
If it turns out the actual liability for the year is less than the date-stamped deposit made on your behalf, don’t worry. You only pay for the tax you require, and the provider’s interest will be recalculated to reflect this.
Upon receiving your payment, the tax pooling provider transfers the deposit it is holding on your behalf from its IR account to your IR account. IR will treat it as a payment made on time by you and will wipe any interest and late payment penalties they may have put on your account.
We recommend you speak with your accountant or tax adviser about tax pooling if you have any questions.
Standard uplift: When 105 percent uplift payments are less than 110 percent payments
Inland Revenue (IR) will sometimes apply the 105 percent standard uplift calculation (CY-1) retrospectively when determining what's due and payable at each provisional tax instalment.
This happens in situations where CY-1 payments turn out to be less than 110 percent uplift payments (CY-2).
When this is the case, IR's system will automatically overwrite the CY-2 calculation once a taxpayer files their return for the previous year.
It will apply what's payable as per the CY-1 calculation to any earlier instalment(s) prior to the date of filing that return. See below.
| Example - uplift instalments for 2020 tax year when 105 percent is less than 110 percent A taxpayer with a 31 March balance date with the following information: 2018 RIT: $35,000 The standard uplift payments due and payable for the 2020 tax year are as follows: 28 Aug 19: $7700 |
TMNZ’s Provisional Tax Calculator also applies this logic when taxpayers enter their residual income tax (RIT) and filing date information.
As you can see, this benefits standard uplift taxpayers.
What if 105 percent is GREATER THAN 110 percent?
When this applies, uplift can be calculated based on the lower CY-2 amount for any instalment(s) due prior to the date the previous year’s return is filed.
This is based on the premise that a taxpayer cannot pay an amount they do not know about and ensures they are not significantly underpaid based on their total uplift amount.
| Example - uplift instalments for 2020 tax year when 105 percent is GREATER THAN 110 percent A taxpayer with a 31 March balance date with the following information: 2018 RIT: $0 The standard uplift payments due and payable for the 2020 tax year are as follows: |
Legislative change to reflect this approach to standard uplift
IR's legal team feels the legislation is not clear in regards to overwriting CY-2 with CY-1 when the latter is lower. As such, there is an amendment in the Taxation (Kiwisaver, Student Loans, and Remedial Matters) Bill that will align the legislation with what the department is doing operationally.
The Bill is due to have its second reading.
Please feel free to contact TMNZ if you have any questions about this.
Be sure to download our free guide on calculating provisional tax using the standard uplift method if you haven't done so.
Jucy Rentals Group say good bye to provisional tax stress
They say you can't make an omelet without breaking some eggs. In this context, a company cannot grow without taking some risks or investing in their business.
Jucy Rentals Group's day-to-day operations highly depend on cash in the bank. It faces a unique challenge when it comes to paying provisional tax. They have to account for two things:
- The seasonality of business with summertime as their peak period
- Investing into their products regularly.
The company's CFO, Jonathan Duncan, found a way to manage cashflow by using TMNZ tax pooling solutions Tax Deposit, Tax Finance and Flexitax to create structure around outgoing payments during the year.
The strategy is simple: Pay into the TMNZ tax pool using Tax Deposit when the cash is available; then if any top ups are required, pay through the tax pool with Flexitax or Tax Finance.
"It gives us the ability to manage our cash flows around that as to what works for us rather than trying to fit in with the timeframes of Inland Revenue and that is a big benefit for us," explains Jonathan.
Jucy Group have settled into the benefits of tax pooling through TMNZ.
Don't let 15 January provisional tax cause stress
Paying 15 January provisional tax can be stressful and a pain in the derrière for many businesses – but it doesn’t have to be.
There is an IR-approved service that allows taxpayers to make this payment when it suits them.
To understand why this might appeal, one must understand why 15 January provisional tax can be problematic.
For starters, let’s look at the timing of this payment. It is due when folks are enjoying the beach, BBQs, the bach or the boat. As the weather gets warmer, business activity for some chills during at this time of the year.
And while the current interest concession rules for taxpayers using the standard uplift method to calculate their provisional tax payments means they now have greater certainty over the amount due, this concession fails to recognise one thing that may be an issue for some during the Christmas-early New Year period: Cashflow.
Xero’s small business insights are telling. Only 39 percent of respondents were cashflow positive in January 2019. Moreover, invoices were also paid on average almost 11 days late during that month.
For some, the Christmas-early New Year period may mean six to eight weeks of no money coming in.
Pay 15 January provisional tax when it suits you
An IR-approved tax pooling provider such as TMNZ offers provisional taxpayers payment flexibility, without having to worry about Inland Revenue (IR) interest and late payment penalties.
A taxpayer entering a payment arrangement with a tax pooling provider has the option of paying what they owe in instalments or deferring payment of the full amount to a date in the future that better suits them.
Approval is guaranteed, and no security is required.
How does it work?
The tax pooling provider makes a deposit into its IR account on behalf of a taxpayer on the date their provisional tax payment is due (e.g. 15 January 2020). This deposit is date stamped as at the date it is made.
A taxpayer then goes about paying the tax pooling provider the core tax.
If they pay the full amount of tax owing, the tax pooling provider will transfer the entire deposit it is holding in its IR account on behalf of that taxpayer to the taxpayer’s IR account.
As this deposit carries a date stamp as at the date it was made, IR will recognise it as if the taxpayer paid their 15 January provisional tax on time once it processes this transfer. This will eliminate any IR interest and late payment penalties.
If the taxpayer opts to pay what they owe in instalments, the tax pooling provider transfers to the taxpayer’s IR account an amount of the date-stamped tax deposit that matches the amount of every part payment they make until they satisfy their liability.
IR will remit all interest and late payment penalties once the taxpayer pays the full amount owing.
What is the cost?
The taxpayer has some interest to pay – but this is cheaper than what IR charges when a taxpayer misses or underpays 15 January provisional tax.
Generally, it’s also less than a taxpayer’s existing finance rates.
A taxpayer choosing to finance the full payment of 15 January provisional tax to a later date will pay a fixed interest cost up front.
This is because they are agreeing to pay what they owe at an agreed upon date in the future.
The interest cost is based on the tax amount due and the date in the future they wish to pay.
Interest works a little differently if a taxpayer chooses to pay in instalments. The tax pooling provider will recalculate its interest on the core tax remaining at the end of each month.
How it compares to your other 15 January options
Another possibility is setting up a payment plan with IR.
However, as part of this process, you will need to supply financial information and details around the timeframe you expect to settle your liability. IR interest will continue to apply during any arrangement you strike.
You could also consider a short-term bank loan if cashflow issues will make paying 15 January provisional tax problematic. Again, there’s a process to go through and certain lending criteria must be met.
What you can do now
No doubt you are doing everything between now and when jolly ol' Santa rides into town on his present-laden sleigh to make sure you have enough funds to make ends meet if you feel the Christmas-early New Year period is going to be tough.
That probably means the usual jazz: preparing a budget, prioritising jobs you can complete quickly, chasing up anyone who owes you money and seeing if you can buy more time with creditors. Every dollar counts, right?
We have more tips in our free guide Better Cashflow Management that you might also find useful.
Now is also the opportune time to seek professional advice if, after doing a forecast, you feel you may encounter some strife. A good advisor will work with you to ensure a potential holiday cashflow issue does not become a crisis and help you manage your 15 January provisional tax payment.
How to find a great accountant: six qualities to look for
Thousands of independent business owners have an awful habit.
While steadily pedaling up the mountain of expansion, new hires, building a great brand, and newfound social media fame, these business owners attempt to juggle their tax payments and financial accounts with their little remaining time.
“We know our business best, so we’d may as well sort out the taxes ourselves…”
Maybe you are one of these owners.
Perhaps you’re putting off hiring an accountant due to the perceived expense.
Don’t delay! Your business can run more smoothly and efficiently than ever with an accountant’s help. An accountant with the right expertise will help you meet tax obligations and provide peace of mind at every stage of your business growth.
It’s time to leave the financial headaches to the professionals. We’ve compiled a list of reasons to convince you – as well as six qualities to identify in a great accountant – so you can keep the focus on nurturing and growing your business.
Should I hire an accountant?
The short answer is – YES.
A great accountant will help with:
- Forecasting
- Tax reporting
- Managing cashflow
- Paying provisional tax and assisting with Inland Revenue (IR) compliance
Unless you’re familiar with tax structures, hiring a chartered accountant is crucial to the success and longevity of your business, and is money well spent.
How do I choose the right accountant?
From start-ups to industry giants, all businesses benefit from hiring an accountant who can assist with managing risk and planning for growth. Provisional tax can be a contentious issue for small business owners.
Your accountant can ease the impact of provisional and terminal tax dates on your business by using tax pooling. Tax pooling gives you control over your provisional payments so that you aren’t stung with use of money interest and penalties if you miss or underpay IR.
Need to know how to find an accountant? Check out Premium TMNZ Accounting Partners.
We recommend you treat your search for an accountant as seriously as you would the recruitment of a new employee. You might seek word-of-mouth referral from peers, friends and family members. Ask them for feedback on your short-listed accountants, you may learn something your research wouldn’t have included.
Look for accounting firms with a similar size to your own company. As a rule, small to medium firms provide a more personalised service specialising in small business work and often have more competitive rates compared to larger accounting firms.
What questions should I ask an accountant?
In your search to find an accountant, look for these qualities:
- Are they registered as a chartered accountant in NZ? These professionals are experts in their field and adhere to the strictest NZICA Code of Ethics.
- How are their communication skills? Jargon is useless to you. Your accountant should be able to explain budgets and financial reporting in layman's terms for you and your team to easily understand.
- How much experience do they have with your business type or industry?
- What are their costs? Will they bill you hourly or monthly? Do they have a fixed fee?
- Do they have an entrepreneurial mindset, think outside the box and embrace innovation?
- Are they flexible and open to change? Your business will continue to grow and evolve. Your accountant needs to help you adapt to this change and manage it financially.
Once you find an accountant in New Zealand who you believe can help your business develop and grow, take the time to establish and nurture a solid, long-lasting business relationship.
Finding the best accountant for your business
Taxes, end-of-year-reports and ever-changing laws and legislation can get complicated. Don’t leave yourself open to penalties and interest. Find an accountant who understands your business and is willing to work with you to meet your goals.
The six qualities listed are a guide to help you find the best fit for your business. A good accountant may be an investment at first, but it is one you will be very grateful for in the long term. Take your time looking for someone who is qualified but also someone you get along well with as the relationship is just as important along the way to success.