Answers to some of the most common questions about tax pooling


Answers to some of the most common questions about tax pooling

Is the service TMNZ provides legal?

Yes, we are a registered tax pooling intermediary with IRD and operate under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994.

Are my payments secure?

Yes, all payments made to us are made into bank accounts administered by an independent trustee, Guardian Trust. With more than 125 years’ experience in New Zealand, Guardian Trust oversees our tax pool account at IRD in which payments are held. They authorise all payments and tax refunds, as well as transfers to taxpayer accounts. At no stage do we have any contact with, or access to, your payments.

What tax payments can TMNZ assist with?

We can help manage provisional or terminal tax due date payments for the current tax year or one just completed. We can also help with other types of tax such as GST and PAYE if you have received a notice of reassessment from IRD due to a voluntary disclosure or IRD audit.

How much more time do I receive if I pay tax through TMNZ?

We give you an extra 75 days past your terminal tax date to pay provisional or terminal tax payments for the current year or one just completed. If you have received a notice of reassessment from IRD, you have an extra 60 days from the date this correspondence was issued to pay the additional tax you owe.

This seems too good to be true. Why does IRD allow the use of tax pooling?

IRD is mainly concerned with receiving the correct amount of tax from taxpayers. It supports the payment options we offer because they allow taxpayers to reduce their compliance costs while ensuring they pay the tax they owe throughout the year in a timely manner.

Will the IRD know if I have set up a payment arrangement with TMNZ?

You will have to tell IRD you are paying what you owe through TMNZ and they will note it in their records to ensure no proactive recovery action is taken by IRD’s debt collection team in relation to the tax amount owed.

Does TMNZ have access to my IRD account and the tax that I owe?

We do not have access to, or visibility of, your IRD account as we are a tax payment intermediary. If you require information pertaining to your IRD account or the amount of tax you owe, you will need to contact IRD or your accountant.

How do I sign up with TMNZ?

Signing up with us is fast and easy. Simply click on the link here and follow the instructions. Once you have confirmed your registration with TMNZ, you then add the taxpayer(s) whose tax affairs you manage.

How does TMNZ help me manage my cashflow?

TMNZ lets you pay upcoming provisional tax payments in a manner or at a time that suits you, without having to worry about IRD late payment penalties. Unlike IRD, which charges interest of 10.39% (as at 9 May 2023) if you don’t pay on the dates it prescribes, TMNZ charges a lower interest cost which can provide significant savings.

It offers two ways – Flexitax and Tax Finance – that can help manage upcoming provisional tax payments and cashflow depending on how you want to pay.

How does Flexitax work?

Flexitax will suit those who wish to pay provisional tax in instalments. There are no set amounts or payment dates – you pay what you can and when it suits your cashflow, provided you do so within the legal deadline (see below). Under Flexitax, TMNZ’s interest is recalculated on the core tax owing each month.

How does Tax Finance work?

Tax Finance lets you defer the full provisional tax payment to a time in the future that better suits your business. You pay a fixed, upfront finance fee and choose the date when you would like to pay. The finance fee is based on the amount of tax due and how long you are deferring your payment.

When must I pay my Flexitax or Tax Finance arrangement with TMNZ?

You have up to 75 days past your terminal tax date for the tax year the arrangement relates to pay what you owe with Flexitax or Tax Finance.

Why should I use TMNZ if I have missed or not paid enough provisional tax for the year?

IRD charges interest of 10.91% (as at 29 August 2023) if you have underpaid or missed a provisional tax payment. Late payment penalties may also apply. With TMNZ, you can you can get significant savings on Inland Revenue interest and eliminate any late payment penalties on the amount owed.

How can I pay the missed or underpaid provisional tax I owe IRD with TMNZ?

There are a few ways to pay missed or underpaid provisional tax:

  • One-off payment: You pay the tax you owe and TMNZ’s interest in a lump sum. We call this Tax Purchase.
  • Instalments: There are no set amounts or payment dates. You chip away at the amount owed over a longer period, paying what you can and when it suits your cashflow. TMNZ’s interest is recalculated on the core tax owing each month. We call this Flexitax.
  • A future date: You choose a time that suits you to pay and pay TMNZ’s fixed interest cost upfront. You then pay the tax owed at the agreed upon future date. We call this Tax Finance.

Are there any conditions?

Yes, TMNZ can help with missed or underpaid income tax payments for the current tax year or one just completed, provided you are within the legal deadline (see below).

How long do I have to use TMNZ to pay provisional tax if I have missed or underpaid for the year?

You have until 75 days past the terminal tax date for that tax year to which the missed or underpaid provisional tax relates to pay what you owe through TMNZ.

How does TMNZ reduce my interest costs and eliminate late payment penalties?

We pay tax into our tax pool account at IRD on each provisional tax date and these payments are date-stamped. Upon receiving your payment, TMNZ arranges the amount of tax at the provisional tax date you require to be transferred from its tax pool account to your IRD account. IRD treats each payment as if it was paid on the original date it was due, removing any interest and late payment penalties incurred.

How long does it take for my payments to TMNZ to show up in my IRD account?

Normally payments made to TMNZ will show in your IRD account within three weeks after being transferred from the tax pool. However, please note this may take longer during the March-June window due to the larger-than-normal volume of transactions that are processed during this time.

How does TMNZ help me manage provisional tax risk and volatility?

TMNZ lets you make your provisional tax payments directly into its tax pool account and this enables you to:

  • Earn a higher interest than IRD pays on overpaid tax by selling it to a taxpayer who has not paid enough.
  • Get access to faster refunds – within three to five working days, and without filing a return.
  • Swap payments between your provisional tax dates to smooth out payments.
  • Use payments held in the tax pool as collateral to draw down short-term funds.
  • Make one payment at each provisional tax date and redistribute the tax among group-related entities once the liability for the year is known.

Who should consider depositing provisional tax payments into the TMNZ tax pool?

Anyone can make their provisional tax payments into the TMNZ tax pool. However, those who have an annual income tax liability of more than $300,000 or experience huge fluctuations in their income from year-to-year will find it a valuable addition to their risk management strategy.

How does depositing into the TMNZ tax pool work?

Rather than paying tax directly to IRD on your provisional tax dates, you make these payments into TMNZ’s tax pool account at IRD. These payments are date stamped and recorded that they belong to you. Once the income tax liability for the year has been determined, we will work with TMNZ to see if we can improve your position if you have underpaid, overpaid or paid tax unevenly for the year. Upon your instruction, we will transfer your payments from the TMNZ tax pool to your IRD account. Your IRD statement will show these transfers at the original tax date once they have been processed, satisfying your income tax liability for the year.

Can I access any payments held in the TMNZ tax pool if required?

Absolutely. Any deposits made into the TMNZ tax pool can be refunded, transferred to your IRD account, sold or used as collateral to draw down short-term funds.

Will TMNZ notify me when I am due to make a deposit into the TMNZ tax pool?

Yes, we will send you reminders notifying you that your next instalment of provisional tax is due and the date by which you need to make payment. Payment instructions will also be included in these reminders.

Am I able to view my deposits held in the TMNZ tax pool?

Yes, your tax pool balances can be viewed by accessing your TMNZ account online.

Can TMNZ help me pay historic income tax or other tax types?

Yes, in situations where you have received a notice of reassessment from IRD due to an audit or voluntary disclosure, you can use TMNZ to get significant savings on Inland Revenue interest and eliminate late payment penalties if it is discovered you owe more PAYE, ESCT, RSCT, RWT, NRWT, income tax, GST, FBT, further income tax, and imputation penalty tax than you originally paid.

Are there any conditions?

Yes, the original tax return must’ve been filed and only the increase between the assessed and reassessed amount of tax can be paid through TMNZ.

Are there any exceptions to this?

Yes – if the original tax return hasn’t been filed when one should have been, and therefore there is no return to be reassessed, you can apply to the Commissioner of Inland Revenue to allow you to use tax pooling on this new liability.  This is called asking for Commissioner’s discretion. If this pertains to your situation, contact us to discuss how we can help.

How long do I have to pay TMNZ if I receive a notice of reassessment from IRD?

You have 60 days from the date the IRD notice of reassessment was issued to pay the additional tax owed through TMNZ.

TMNZ Tax Drawdown allows you to use your tax payments in the pool as collateral to take out funds at attractive interest rates which are more competitive than the banks. You can request money at any time and it will land in your account within three to five business days (provided AML requirements are met). Access to money is guaranteed, and there’s no additional security required.

With Tax Drawdown you can borrow money for a minimum of four weeks or a maximum of up to 75 days after your terminal tax date. Once you’ve paid us back, we can continue to hold those tax payments in the pool (which will be available for a future drawdown) or transfer the payments to the IR to meet your tax liability.

Small businesses and larger companies alike can tap into Tax Drawdown, and there’s no limit to how much of your tax deposit you can withdraw. Contact us to discuss how Tax Drawdown can put you in control of your cashflow.

Can't find what you're looking for?

We have the largest support team in the business, get in touch

Contact us