How to Grow Your Firm with Tax Pooling


An essential guide for accountants and tax advisors on how tax pooling can help your clients

Explaining tax pooling to clients can be a challenge. We’ve put all our experience into one downloadable resource that will enable you to provide solutions when having conversations with clients about cashflow, finance, working capital options, mitigating risk and reducing compliance costs when things go wrong.

Here is what we cover

An introduction to tax pooling solutions

Tax pooling is a solution for clients who need help with cashflow management, finance, working capital, risk management and audits.

Content you can use right now

Current version available for download: April 2020
Previously published version(s):  November 2019

Preview: About this guide

The dictionary defines an accountant as someone whose job is to keep and audit financial accounts. Many in the profession will, however, argue that description of their vocation is no longer fit for purpose. Rightly so, too.

Crunching numbers and balancing the books was once your firm’s bread and butter, but automation and the emergence of software such as Xero and MYOB have simplified much of that compliance work.

You have now transitioned from bookkeeper to a trusted business advisor – a highly valued partner, an enabler whose creative thinking, ability to make sense of the figures and problem solving can help your clients turn their business dreams into a reality.

That’s why Tax Management NZ has cobbled together this guide about tax pooling. (For those not au fait with tax pooling, there is a section at the beginning that explains what it is and how it works.)

Our aim is to shed some light on a free, IRD approved service that enables you to add value in the business advisory space and have more meaningful conversations with your clients.

Not only do we want to help you grow your firm’s revenue in this area, but we also want to help you provide solutions when discussing topics such as cashflow management, financing and working capital, risk management, and audits and voluntary disclosures with those who call on your expertise.

We hope you learn something new. Enjoy the read.

Guide sneak peak

About this Guide…

The dictionary defines an accountant as someone whose job is to keep and audit financial accounts.

Many in the profession will, however, argue that description of their vocation is no longer fit for purpose. Rightly so, too.

Crunching numbers and balancing the books was once your firm’s bread and butter, but automation and the emergence of software such as Xero and MYOB have simplified much of that compliance work.

You have now transitioned from bookkeeper to a trusted business advisor – a highly valued partner, an enabler whose creative thinking, ability to make sense of the figures and problem solving can help your clients turn their business dreams into a reality.

That’s why Tax Management NZ has cobbled together this guide about tax pooling. (For those not au fait with tax pooling, there is a section at the beginning that explains what it is and how it works.)

Our aim is to shed some light on a free, IRDapproved service that enables you to add value in the business advisory space and have more meaningful conversations with your clients.

Not only do we want to help you grow your firm’s revenue in this area, but we also want to help you provide solutions when discussing topics such as cashflow management, financing and working capital, risk management, and audits and voluntary disclosures with those who call on your expertise.

We hope you learn something new. Enjoy the read.

Tax Management NZ

Introducing Tax Pooling

Tax pooling is an IRD-approved service offered by a commercial provider such as Tax Management NZ (TMNZ). It has been operating in New Zealand since legislation came into effect in 2003.

It allows taxpayers to:
• Pay income tax at a time or in a manner that suits them, at a lower interest cost than what IRD charges for unpaid tax and without incurring late payment penalties.

• Reduce IRD interest costs by up to 30 percent and eliminate late payment penalties on underpaid income tax or reassessed tax.

• Pool their provisional tax payments in a registered provider’s IRD account for the potential to earn additional interest above the IRD’s credit interest and access the full suite of tax pooling products available.

A tax pooling provider is registered with IRD and operates under legislation set out in the Income Tax Act 2007 (sections RP17-RP21 and OB and OP) and Tax Administration Act 1994 (sections 15O-15T and 120OE).

An independent trustee oversees payments held in a provider’s tax pool account and the bank accounts into which payments are made. Guardian Trust is the trustee used by TMNZ.

At no stage does a tax pooling provider have access to client payments.

(pg 4)

How it works

At each provisional tax date, taxpayers make their provisional tax payments into TMNZ’s tax pooling account at IRD as opposed to their own. TMNZ also pays into the pool at every provisional tax date to ensure there is enough supply to meet demand. All payments are date stamped as at the date they were paid.

After taxpayers finalise their returns and transfer the amount of tax needed from the tax pool to their IRD account to settle what they owe for the year, they can sell any surplus tax they have to a taxpayer who hasn’t paid enough provisional tax.

A taxpayer purchasing the tax does not need to be a member of TMNZ’s tax pool account.

The interest paid by TMNZ to someone who opts to sell their excess tax is closer to normal commercial interest rates as opposed to the 0.81 percent IRD currently pays.

Those who have missed a payment or underpaid tax for the year are charged an interest cost that is much fairer than the 8.35 percent IRD charges at present.

TMNZ retains a portion of the interest paid by the taxpayer requiring the tax as its compensation for providing the service.

Who uses tax pooling

Tax pooling is used by New Zealand’s largest taxpayers, accountancy firms and thousands of small- and medium-sized businesses.

Further reading

More information about tax pooling can be found at https://www.ird.govt.nz/topics/intermediaries/tax-pooling/

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