Wellington skyline at night

TMNZ | CA ANZ IRD Satisfaction Survey 2023

TMNZ and CA ANZ have worked together to bring you the results of the 2023 Satisfaction Survey.

Tax practitioners say it takes longer to get a response from Inland Revenue Department (IRD), but they find that tax officials are helpful and demonstrate a good understanding of client issues, according to the 2023 Inland Revenue Satisfaction Survey.

The annual survey is conducted jointly by CA ANZ and Tax Management New Zealand (TMNZ) to provide insight into what tax practitioners think of the way in which IRD administers the tax system.

Click through to read the full results on Acuity Magazine here.


How to manage cashflow over Christmas

Everyone loves the middle of summer and spending time with family and friends over Christmas, but it can be a challenging time of year for many small and medium-sized Kiwi businesses.

According to a poll conducted by the Employers and Manufacturers’ Association, more than half of businesses experience cashflow constraints between January and March.

It’s hardly surprising. The period after Christmas is traditionally slow for many companies, with people away enjoying their holidays. Consumers also tend to reduce spending after the expensive Christmas and New Year period.

Businesses can come under pressure for a number of reasons. Earnings will be down if companies shut over the break, while others will feel the pinch if they have paid bonuses before the end of the year.

Considering these facts, it’s understandable that many businesses struggle to manage cashflow and make provisional tax payments on 15 January every year.

Unfortunately, the Inland Revenue doesn’t factor in these seasonal challenges. It expects payments to be made on time and charges taxpayers late payment penalties of up to 20 percent per annum and use of money interest (UOMI) if tax is not received on the due date.

Your options for managing cashflow

What are the best options for businesses that want to manage cashflow and free-up money over the summer?

Tax pooling is IRD-approved and can be used to defer provisional tax payments to a time that suits the taxpayer without incurring late payment penalties and UOMI.

This method is cheaper than using many traditional forms of finance. Rates at Tax Management NZ (TMNZ) start from below eight percent, and tax pooling doesn’t affect existing lines of credit. Also, no credit checks or security are required.

The full amount of finance doesn’t need to be paid back if less tax is owed than first thought. The finance arrangement can be easily extended as well.

How tax pooling can help

Say you want to defer a $5,000 provisional tax payment for six months. You would pay TMNZ a one-off, tax-deductible interest amount and TMNZ would arrange the $5,000 provisional tax payment on your behalf.

The interest amount is based on the amount of tax financed and the period of maturity, so in this instance, ​it would be roughly $205.

The provisional tax payment is held in an IRD account administered by the Guardian Trust. Guardian Trust instructs the IRD to transfer the tax into your IRD account when you repay the $5,000 principal in six months’ time.

The IRD treats the $5,000 provisional tax as being paid on time once the transfer is processed. It’s that simple.

Ready to ease your seasonal cashflow worries? Get in touch with our team to discuss tax pooling options today.

Find our latest resources on tax pooling and calculating tax using the Standard Uplift method here: https://www.tmnz.co.nz/calculating-provisional-tax/


How tax pooling can help your tax management

Meet Andy, a builder who has run his own business for three years. Things are going well, and he’s set to make a substantial profit in the current financial year. He’s well-paid and smart enough to set aside tax he owes with each payment. But clients don’t always pay him on time, causing some serious headaches.

Like many businesses, Andy experiences cashflow issues. He makes a profit but doesn’t always have enough funds in his account to pay provisional tax when it’s due.

What should Andy do? Grin and bear the Inland Revenue’s late payment penalties and use of money interest charges after missing his payment dates? Or seek a better option?

Luckily, Andy’s accountant Lisa ​knows all about tax pooling and how it can relieve the financial pressure.

Tax pooling explained

Andy asks his accountant how tax pooling works and some of its main benefits.

Lisa explains that tax pooling has been available to taxpayers for two decades, starting in 2003 when Tax Management NZ (TMNZ) became a registered provider with IRD.

The accountant says tax pooling has clear benefits over traditional tax management:

  • Taxpayers can choose to pay their liabilities in a time and manner that suits them, without having to worry about IRD interest and penalties.
  • They can make significant savings on use of money interest charged and eliminate late payment penalties if they miss or underpay provisional tax, or if they are reassessed by IRD.
  • When taxpayers overpay into the TMNZ tax pool, they can earn a much higher rate of interest on overpayment of funds than they would receive from the IRD.

Who oversees TMNZ’s tax pool?

Lisa assures Andy that all payments made into TMNZ’s tax pool account at the IRD are managed by an independent trustee, Guardian Trust.

Guardian Trust oversees the bank accounts into which taxpayers pay their money, as well as the transfer of funds from the TMNZ tax pool to Andy’s IRD account.

Because the tax being transferred has been paid and date stamped as at the original due date, any penalties and interest are wiped once the payment is processed by the IRD.

Companies of all sizes can use tax pooling

Tax pooling can help businesses of all sizes, from companies with thousands of employees down to sole traders. TMNZ’s tax pool is the largest and most established in the country.

Lisa’s research found two companies TMNZ has helped.

One company uses tax pooling to counteract fluctuating seasonal revenue:

“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.”

The second company uses a tax pool as they need to invest in equipment regularly.

“With a business like ours, we are investing quite heavily into assets like cars, campers, and boats. Cash upfront is important [for] us to have.”

Tax Management NZ has helped both companies manage working capital and mitigate the risk of fees and penalties.

“What is the cost of this?” Andy asks.

“Just TMNZ interest,” Lisa replies.

Tax pools can help with voluntary disclosures and audits

Lisa looks through Andy’s expected outgoings for the year. These range from the cost of living to many other expenses associated with owning a business.

The accountant realises that in a previous year, Andy made a mistake on one of his returns and must file a voluntary disclosure with the IRD.

“How can Andy get ahead with the current year if he now has to pay an additional amount of tax for a past year?” Lisa wonders.

TMNZ can assist taxpayers who owe an increased amount of tax as a result of a voluntary disclosure or audit.

Tax pooling provides 60 days from the date the IRD reassessment notice was issued to buy the tax payment he needs and send it to the IRD.

The different tax types available to purchase are historic income tax payments, deferrable tax, and agreed delay tax, as well as other tax types such as GST, RWT, PIE, FBT, NRT, and DWT.

Lisa can use TMNZ to reduce the interest and late payment penalties cost of Andy’s voluntary disclosure.

For the current tax year, Lisa can set up either a Flexitax® or Tax Finance  arrangement to give him more flexibility and time to pay (up to 75 days past his terminal tax date for that tax year).

Lisa has other clients that are medium-large taxpayers with big bills and paydays. TMNZ’s Tax Deposit product can help them.

Other advantages of tax pooling

There are several other advantages to using a tax pool:

  • Excess funds paid into the pool can either be used for future dates and any other tax types where a reassessment has not been issued.
  • There’s the option to sell surplus tax to a taxpayer who has underpaid to earn additional interest.
  • The refund process is much faster than directly through the IRD (within three to five days, and without having to file a return for the year).

Take back control

Take control of your tax management with TMNZ tax pooling — a more convenient way to meet your provisional tax obligations.

We offer solutions for all kinds of businesses and financial situations. If you’re new to paying provisional tax, check out our resources on managing tax and business cashflow here.

Ask your accountant about tax pooling options today, or get in touch with our team to find out more.

 


Budget review with Tony Alexander

Tony presents his view on the Governments budget just one day after it’s release. Get Tony’s thinking on the prospects for the NZ economy and the housing market as vaccinations and policy are deployed.

https://vimeo.com/553143946

TMNZ virtual roadshow: Tony Alexander talks post-COVID-19 economic recovery

Image: Auckland CBD from above

The increase in New Zealand’s net debt to GDP ratio over the next four years is not the bogeyman some are making it out to be, nor will the Government necessarily have to increase taxes to pay off what they are borrowing.

That’s according to one of New Zealand’s leading and respected economists, Tony Alexander, who last week discussed a range of topics relating to the current and post-COVID-19 economic landscape as part of TMNZ’s first virtual roadshow for the year.

Image: Tony Alexander

The net debt to GDP ratio increase

The Budget shows New Zealand’s net debt to GDP ratio is forecast rise to 30.2 percent this year and peak at 53.6 percent in 2023.

This is up from 19 percent last year.

Unsurprisingly, this has led to concern in some quarters.

However, Alexander (pictured left) says it’s important to remember there is no permanent increase in the size of the Government’s spending as a proportion of the New Zealand economy.

“Some people may be looking at this as the Government spending a lot more. Yes, in the short term they are, but in about five years’ time the ratio of the Government’s spending to the size of our economy will pretty much be back to where it was [during the] last fiscal year.

“That gives me assurance that Grant Robertson does want to continue along the lines of finance ministers in New Zealand since the early 1990s of trying his best as possible to get good control over the quantity, and hopefully quality, of Government spending going forward.”

Alexander says that credit rating agency Standard & Poor’s believes New Zealand’s economic outlook is better than The Treasury is forecasting.

They are showing no signs of issuing a potential downgrade in the wake of the Budget, he says.

A peak net debt to GDP ratio of 53.6 percent is still lower than where other economies are at currently. Some are sitting as high as 110 percent.

“Even after all this, we’re still going to be in a very good position,” says Alexander.

Tax hikes not the only way to pay down debt

In terms of how the Government will go about reducing its level of debt, there is talk they may have to introduce new or increase existing taxes.

That's because its tax revenue is forecast to drop.

The Treasury expects tax revenues to fall from $86.5 billion for the year to June 2019 to $80.1 billion dollars for the year to June 2021. Over the period to June 2024, it expects tax revenue to be more than $15 billion lower net of the effect of the reduced GDP over the period.

However, Alexander believes it is possible for the Government to reduce its debt without tinkering with the tax system.

He bases this claim on past experiences.

For instance, Alexander cites successive National- and Labour-led administrations managing to decrease New Zealand’s net debt to GDP ratio from 55 percent in 1992 to just six percent in 2008 through controlled, responsible spending.

“New Zealand has an established record of good fiscal control under both Labour and National governments,” he says.

“My expectation is we will see the net debt to GDP ratio in New Zealand decreasing over an extended period, that it’ll be a gradual process and it will be able to be achieved with spending restraint, rather than whacking GST up to 20 percent or introducing a new 46 percent top marginal tax rate or that sort of thing.”

Increasing taxes in the future would also be counter-intuitive to the Government’s goal of trying to get people to spend money now, when confidence is low.

“If they did [raise tax], we would spend less in anticipation of higher taxes down the track.”

Hear more from Tony Alexander

The affable Alexander spoke at length about several different topics during his informative, wide-ranging session with TMNZ.

These include:

  • His thoughts on the Government’s Budget and The Treasury’s economic forecast.
  • How the New Zealand dollar will fare in the next 12 to 18 months.
  • Why the party is over for tourism and what the collapse of that industry might mean for regional New Zealand.
  • When he feels banks will resume lending again.
  • Why quantitative easing does not cause hyperinflation, but may push up asset market prices.
  • The chances of the Reserve Bank of New Zealand resorting to a negative official cash rate.
  • The outlook for the property market.

Trust us, this is one hour worth your time.

You can watch Alexander’s full webcast here.

Next virtual roadshow – register now

Richard Owen from IRD will be joining us as part of our next TMNZ virtual roadshow on Wednesday 17 June.

Owen is the small and medium enterprises customer segment lead at the department. He will cover tax policy on COVID-19 and the impact for IRD, tax agents and taxpayers.

If you have questions about the remission of UOMI, the carrying back of tax losses or the Small Business Cashflow Loan Scheme, then you won't want to miss this.

You can register here. Get in quick because spaces are going fast.


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 Tax Management NZ’s tax pool account.

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 is 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 IRD 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.

“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,” says Matthew.

“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. 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 IRD-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 IRD 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 IRD 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. (This is subject to market demand, which has been severely impacted by the COVID-19 pandemic.)

Conversely, if not enough tax has been paid, Matthew can reduce the IRD 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.

“[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,” he says.

“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 Tax Management NZ an easy choice is it makes the whole provisional tax regime easier to deal with.”

Watch Matthew's interview below:



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."




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.


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.