Coffee with Bernice at BLO Consulting

Tax is not the only thing business owners focus on, says Bernice Lo from BLO Consulting.

She knows how they think. After all, she started her accountancy practice in 2007. Today, it is a thriving team of seven with another team overseas, making them available 24 hours a day during the work week.

Their clientele are varied. A large portion do real estate transactions, another group are subsidiaries of overseas companies and another group are New Zealand based.

Regardless of their unique situation, they all have one thing in common: Provisional tax.

We had the opportunity to ask Bernice questions such as the below:

  • Besides cashflow, what are other obstacles for businesses?
  • Would you recommend TMNZ to other businesses?
  • Why did you choose to become a premium partner with TMNZ?

"[Tax pooling] is cheaper and has very competitive rates. Dealing with the TMNZ team has always been great, so I like it [all]." , she says.

Watch her video below to hear more.


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 Tax Management NZ products 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.

Watch the video below to hear more from Jonathan.




Coffee with Maria from The Tax Lady

"Why would IRD allow you to do this?"

This is the reaction of some of Maria Anderson's clients when they hear about how tax pooling can help with provisional tax payments for the first time.

Maria is one of the Directors at The Tax Lady in Upper Hutt, north of Wellington.

Their clients range from small businesses to sole traders through to construction workers. Fluctuating cashflow comes with the territory, and Flexitax® gives them more time to their provisional tax and when it suits their cashflow.

'Pub meetings' with friends and using accounting software without a chartered accountant examining it for gaps can leave a business in a vulnerable place. These stories are what drives Maria to help her clients understand how the tax regime works so they can comprehend the risk of missing or underpaying their tax to IRD.

She believes that if they know what legislation says in plain English and understand the options available through tax pooling well enough, they can make an informed decision.

"Once you explain it, it all falls into place."




Image: 15 January provisional tax

Don't let 15 January provisional tax cause stress

Image: 15 January provisional tax and cashflow.

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 IRD-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.

Only IRD can be so cruel to have provisional tax due on 15 January – and then flog a taxpayer with its interest (currently 8.35 percent) and late payment penalties if they fail to pay on time.

Pay 15 January provisional tax when it suits you

An IRD-approved tax pooling provider such as TMNZ offers provisional taxpayers payment flexibility, without having to worry about IRD 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 IRD 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 IRD account on behalf of that taxpayer to the taxpayer’s IRD account.

As this deposit carries a date stamp as at the date it was made, IRD will recognise it as if the taxpayer paid their 15 January provisional tax on time once it processes this transfer. This will eliminate any IRD 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 IRD account an amount of the date-stamped tax deposit that matches the amount of every part payment they make until they satisfy their liability.

IRD 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 the 8.35 percent IRD 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.

Other options for 15 January provisional tax and how tax pooling compares

Another possibility is setting up a payment plan with IRD.

However, as part of this process, you will need to supply financial information and details around the timeframe you expect to settle your liability. IRD 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 IRD 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, despite Inland Revenue’s 2018 introduction of payments via the accounting income method – which does not allow for tax pooling.

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 IRD.

Need to know how to find an
accountant? Do your research. Treat
your search for an accountant as seriously as you would the recruitment of a
new employee. 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. If you aren’t sure where to start, Tax Management NZ has a list of trusted accountants on our website.

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.


Image: Safe harbour provision.

28 August provisional tax: Don’t forget IRD interest rise

For many, the 28 August provisional tax instalment is the first for the 2020 tax year – and failing to pay on time will cost taxpayers more money.

That’s because the interest IRD charges when tax is unpaid or underpaid is increasing from 8.22 percent to 8.35 percent.

The new rate will apply the day after the 28 August provisional tax instalment is due.

Unsurprisingly, the rates adjustment is proving unpopular with accountants and taxpayers.

Many are criticising the increase as interest rates are trending in the opposite direction. (IRD says market conditions in April were the basis for the new rates.)

They also take umbrage that the interest differential between what the taxman pays if tax is overpaid and what they charge if tax is underpaid has increased in IRD’s favour.

Nonetheless, it does not change the fact that the cost of not paying provisional tax on time is going to increase.

Along with IRD interest, late payment penalties will also apply if a taxpayer does not pay on time.

IRD administers late payment penalties as follows:

  • One percent the day after payment was due.
  • An additional four percent if the tax (including late payment penalties) is still outstanding after seven days.

As such, it is important taxpayers pay 28 August provisional tax on time – and know their options if they cannot.

Tax pooling can help with 28 August provisional tax

If someone finds paying 28 August provisional tax problematic or has a better use for the money they have set aside for tax, don’t forget about tax pooling.

A tax pooling provider such as Tax Management NZ (TMNZ) deposits date-stamped tax into its IRD account on each provisional tax date for taxpayers wanting the option to pay in a manner or at a time that suits them, without having to worry about late payment penalties.

The taxpayer has some interest to pay - but it is less than what IRD charges them. A taxpayer can save significantly on IRD interest with TMNZ.

And unlike an IRD payment plan, there is no need to supply financial information. Approval is guaranteed.

Taxpayers entering an arrangement with TMNZ make their payments when it suits their cashflow and TMNZ allocates the tax they need to their required provisional tax date(s).

As the tax TMNZ is transferring to a taxpayer’s IRD account has been paid and date stamped as at the original due date, IRD treats it as if the taxpayer paid 28 August provisional tax on time when they complete the transaction. This, therefore, eliminates late payment penalties.

Anyone using the standard uplift, estimation or GST ratio methods to calculate their provisional tax can use tax pooling. However, those using the accounting income method cannot as legislation prevents them from doing so.

Feel free to discuss tax pooling with your accountant ahead of your 28 August provisional tax payment if cashflow is tight.


Image: Walker & Co Real Estate owners Lee And Marc Walker

Walker & Co Real Estate remedy big provisional tax problem

Image: Walker & Co Real Estate owners Lee And Marc Walker

Provisional tax is not without its challenges. Marc and Lee Walker from Walker & Co Real Estate know this all too well.

The husband and wife duo do not take umbrage at paying tax. No siree Bob. It’s part and parcel of being in business. And they accept it ain’t going away.

But they do have issues with the provisional tax system in its current condition.

Occasionally they feel the whole thing isn’t conducive to helping their small business grow. After all, having to pay tax even though they have not earned a single cent can certainly be a kick in the ribs.

But that is a consequence of IRD’s inflexible payment dates. Pay up – or pay the price.

If this sounds familiar, grab a pew and lend them an ear. Marc and Lee are about to detail how paying provisional tax with TMNZ enables Walker & Co Real Estate to remedy this problem.

Introducing Walker & Co Real Estate

To understand their perspective on provisional tax, one must understand more about their business.

They own and operate Walker & Co Real Estate. It’s a boutique agency in Upper Hutt. Warm and welcoming, it’s the type of place that caters to all walks of life. There’s always a cuppa on hand as they converse with buyers and sellers to deliver the best outcome. It certainly has that homely feel.

Collectively, Marc and Lee bring nigh on 20 years’ experience within the industry. So, they know what’s what. Five of those have been spent running Walker & Co Real Estate.

Like any business, there are peaks and valleys. There are sales aplenty in spring and Christmas. In winter, business chills a little.

That seasonality affects Walker & Co Real Estate. When cash is in short supply, Marc says it can be tough getting things like marketing and advertising squared away.

Adds Lee: “Obviously when your commissions come in there’s good money. However, you’ve got to sell a property before you get the cash coming in. So cashflow is definitely…very difficult.”

Image: Walker & Co Real Estate pay provisional tax with TMNZ.

Provisional tax can hinder business growth

And the last thing Walker & Co Real Estate wants to do is hand over money to IRD when things are tight.

That puts the kybosh on their business plans as they are having to use the funds they need to operate or would invest elsewhere to cover it.

That, in turn, does not help them earn the do-re-mi.

Why Walker & Co Real Estate uses TMNZ

As they prefer to keep money in their business, Walker & Co Real Estate chooses to pay its provisional tax with TMNZ. This allows them to make their payments when it suits their business cashflow.

“Having the resource to put into your business is very important,” says Marc.

 “Growth is important and if you take resources away from companies like us, our growth gets stagnant a little bit and it takes longer to get traction. To not worry about [provisional tax], it certainly helps us grow.”

Lee agrees. “It takes away all those stresses. You’re passing it on to somebody else and saying ‘take care of this for me, I don’t know what to do, we’ve got a shortage of cashflow’ and it’s the best way of putting more energy into your business and doing the things that you’re good at.”

All that peace of mind costs the pair is TMNZ’s interest, which is much cheaper than the usurious interest IRD charges. Not a bad trade-off for greater flexibility. No nasty late payment penalties either.

Lee says everything was easy to set up. Forget about phoning IRD and, providing you can get through to someone, facing an “interrogation” from its staff. 

“[TMNZ are] there to help you – and they know their stuff.

“If you are unsure of anything at all, they will answer everything in a way that you can understand it. The everyday person, because there’s accountant language and everyday person language and they put it in a way that you can understand it as an individual or a company.”

Image: Walker & Co Real Estate logo
Photos: Colin McDiarmid.

Just give it a try

Marc reckons other business owners should give serious thought to using TMNZ.

“You solve a problem for a lot of businesses,” he says.

“I talk with a lot of business owners and we’re all the same – there’s a certain month in the year that you need to get things squared away and this from my point of view would certainly help them.”

Lee is much more effusive in her praise.

“Every time you have got that payment coming up you know you can give them a call and they will have it sorted for you. When you use the professionals and they do a job and do it well, leave it to them.

“Try it for a couple of years and see how you go. You’ll never turn back and will use them every time.”


Image: Accounting Income Method (AIM)

Accounting income method: When cashflow doesn't match accounting profit

Image: Accounting Income Method (AIM)

IRD’s marketing material boasts the accounting income method (AIM) means taxpayers only pay provisional tax when they make a profit.

But what it neglects to convey is what happens if an AIM
user making a profit has no money in their bank account to pay tax when it is
due.

The answer? Bad things. IRD charges interest and penalties – and there is very little they can do to mitigate the financial consequences.

Tax pooling, for instance, is not available to them. (We’ll explain IRD’s rationale as to why it isn't further on in this article.)

Indeed, an issue with using accounting profit as the basis of AIM payments is it assumes a taxpayer has the necessary cashflow to pay tax.

As those earning income from business activity know, that is
not always the case.

For instance, take a business that concludes the sale of a
large piece of equipment and finishes installing it. They will derive the
income for tax purposes at that time.

However, if the customer significantly delays payment or the
terms of supply mean the customer will pay the price over many months, the business
will not have the cashflow to pay provisional tax.

As such, they will incur steep IRD interest (soon to be 8.35 percent) and late payment penalties if they fail to pay the taxman on time.

Now if the taxpayer was using another method to calculate their provisional tax payments, they will have the ability to use tax pooling to make this payment when it suits their cashflow.

No worries. All good in the prov. tax hood.

But those using the accounting income method DO NOT enjoy this luxury. Legislation prevents them from using tax pooling. (Tax pooling can only help with terminal tax or reassessments if a taxpayer is using AIM.)

This hardly seems fair, does it?

Is it right IRD restricts the use of tax pooling for accounting income method taxpayers?

It was something the Tax Pooling Intermediary Association, of which TMNZ is a member, brought to officials’ attention when they were seeking submissions in 2016.

They felt the absence of any fallback mechanism such as tax
pooling will put additional stress on taxpayers to pay a liability under AIM
when they may not have enough cash.

“This type of situation is inconsistent with the policy
intent of easing the burden on taxpayers and encouraging them to pay the right
amount of tax at the right time without incurring penalties and could easily be
mitigated by allowing tax pooling to be used with the AIM method.

“Feedback we have received from engaging with our SME
clients is that the most important factor they have to deal with when paying
taxes is cashflow.”

Chartered Accountants ANZ echoed similar sentiments in its submission, saying IRD’s analysis on AIM “ignores the cashflow element to a business”.

As an example, they cite a company that makes strong sales –
but may not have the funds to pay provisional tax if debtors are not paying or if
the owner is re-investing cash to grow the business.

“There is no reason to exclude AIM taxpayers from tax
pooling.

“Tax pooling will enable the AIM taxpayer to meet their obligations without incurring IRD interest or penalties. Denying AIM taxpayers this flexibility at times when cashflow is tight is poor design.”

IRD’s position on AIM and tax pooling

In reply, IRD felt it was not appropriate for taxpayers to use tax pooling for AIM provisional tax payments.

That’s because payments under the accounting income method
have certainty, more closely match the income flows of a business and have no exposure
to IRD interest (assuming a taxpayer pays the amount due on time of course).

“The use of tax pooling for provisional tax payments throughout the income year provides certainty to taxpayers when payments are uncertain. It also assists in situations when provisional tax payments made under the estimate or uplift methods are not matched to the income flows of the business.

“Officials therefore believe that AIM effectively removes any benefit to a business from using tax pooling during the income year.”

They argue mismatches in cashflow to tax payments occur when tax adjustments move the taxable profit further away from accounting profit. Under the accounting income method, there is “minimal movement” away from accounting profit.

Moreover, IRD feels taxpayers could use their standard banking facilities if they have cashflow concerns.

If cashflow problems were to persist, they can choose to use a provisional tax method that better aligns with their cashflow.

“Pooling itself does not operate as a pure financial
institution with regard to the short-term loans, rather it facilitates the sale
and purchase of tax paid at different dates.”

However, the Tax Pooling Intermediary Association says pooling is more than just the sale and purchase of tax at different dates and IRD is missing the point.

 “Tax pooling has evolved … and is now used extensively by taxpayers as a cashflow management tool, to enable them to pay their income tax when cashflow from their business allows.”

The fact of the matter

Whatever someone agrees or disagrees with IRD's stance, the fact remains the same.

Taxpayers using the accounting income method must be aware
of the potential consequences they face if they are making profit but have insufficient
cash to pay tax.

And as they cannot use tax pooling to defer AIM payments if they are experiencing a cashflow problem, they need to consider if it is the right option for them. It can also be quite a compliance-heavy method, especially for taxpayers with significant year-end adjustments.

In other words, do not take IRD's marketing spin as gospel.


A man sitting at a desk, using a calculator to do some accounting work.

Five great accounting tips for small and medium businesses

Getting the right small business accounting advice is vital for the success and growth of your small business. Here are five essential tips to help organise accounting for your small business.

Keep a record of tax deadlines

Knowing when business taxes are due throughout the financial year is crucial for the health of your small business. If you miss an important deadline, you could receive a costly penalty. In New Zealand, staying on top of GST returns and paying provisional tax on time is especially important. 

The IRD has resources available to remind you of these important dates. You can also check the TMNZ Tax Dates Calendar to see your terminal tax and provisional tax dates. It is important to be proactive about tracking these yearly deadlines to meet your ongoing tax obligations.

Be diligent and stay on top of invoicing

A common challenge when accounting for small businesses is keeping track of invoices. Courteous clients will provide quick payment for your services rendered. Unfortunately, fair and steady returns are not always reality, which affects the cash flow of your business. 

Be polite but assertive when invoicing. Send invoices as soon as possible after a job is complete. Be clear in your expectations regarding how clients can provide payment, and by which date. Arrange standard follow-up procedures if you do not hear back or do not receive payment after a certain period. 

Always remember that you and your employees work hard to provide quality goods and impeccable services to your clients. You have every right to expect clients to respect that effort by meeting their payment obligations as quickly as possible.

Make the most of automated accounting software 

Automated accounting software can be a lifesaver for small businesses. Accounting software covers many of the fundamentals of running a small business. This software helps keep track of expenses and automatically generates forms and reports about your business. This lightens the load of your day-to-day accounting practices.

Tax Management NZ is integrated with accounting software such as Tax Lab and APS to make it that much easier and convenient to use tax pooling if a payment has been missed. To get the most out of accounting software, we would recommend a chartered accountant look over the specifics of your business for any gaps that may have inadvertently be over-looked.

Know your limits and hire a professional when necessary

Just because you have a great idea for a business, doesn’t necessarily mean you have the skills and knowledge to do small business accounting. Many small to medium business owners try to tackle bookkeeping on their own to save costs. But in the end, making errors or filing expenses incorrectly could prove costlier than hiring a professional. 

Maintain a relationship with a chartered accountant who can help keep your books tidy. A reliable accountant can help you arrange tax pooling for your business. Tax pooling provides you with more control and flexibility to manage tax payments and can save your business money from late payment penalties and use of money interest.

You may only need your accountant’s services several times a year. However, having a professional on hand for accounting advice gives you precious peace of mind that your accounting is in order. 

Don’t get caught out by unexpected costs 

The longer your business is in operation, the more likely you are to face a large, unexpected cost. For example, you may find yourself needing to repair or upgrade your business’ equipment. This is costly, but unavoidable for your business to operate.

An unexpected cost could even come in the form of an opportunity to grow your business, such as a market gap that you could fill perfectly. Taking advantage of such opportunities requires up-front investment. 

In either case, expect the unexpected and put money aside to cover unforeseen operational costs. This is sound advice for any small business. Doing so will save you the headache of scrambling to cover a significant bill or missing out on the chance to grow your business.

_____________________________________________________________________________________________

Tax Management NZ is trusted by thousands of Kiwi small and medium-sized businesses. We are the leading tax pooling provider in New Zealand and work closely with IRD to ensure our services are secure and reliable. Get in touch with our team today for tax pooling and provisional tax payment advice.


Image: IRD system

IRD interest changes

Image: IRD interest

The cost of getting provisional tax payments wrong is about to increase – but not with TMNZ.

IRD interest rates are going to change and the news is not good for taxpayers.

IRD is increasing the interest it charges taxpayers if they underpay or fail to pay their provisional tax on time from 8.22 percent to 8.35 percent per annum.

They are decreasing the amount of interest they pay a taxpayer if they overpay their tax from 1.02 percent to 0.81 percent per annum.

This change takes effect from 29 August 2019.

Despite this adjustment, TMNZ is keeping its costs of purchasing tax at its current low rates.

With an increase in the cost of underpaying tax and taxpayers receiving lower interest when overpaying, there has never been a better time to use tax pooling.

IRD interest: How rate are sets

IRD uses the Reserve Bank of New Zealand's rates to set the interest it charges and pays taxpayers.

They basis for interest on underpayments is the floating first mortgage new customer rate, plus 2.5 percent.

For interest on overpayments, they take the Reserve Bank’s 90-day bank bill rate and minus one percent.

IRD reviews interest rates regularly to ensure they are in line with market interest rates.

The last IRD rate change was in March 2017.