If you own a business, you’re probably familiar with paying provisional tax. Which means you’re also familiar with its inflexibility, and the penalties and interest that accumulate if you miss a provisional tax due date.

The problem with this model is how it affects your cashflow. You need money to pay staff, cover operational expenses, and invest in growth initiatives, yet it’s tied up in saving for tax time. Or worse yet, in shelling out for Inland Revenue (IR) interest and penalties on late payments.

No matter which camp you’re in, there is relief and it’s called tax pooling.

If you own a business, then you can benefit from tax pooling. Let us explain how.

First, what happens if I miss my provisional tax payment?

If you’ve paid taxes late or haven’t paid enough by the provisional tax due date, Inland Revenue may charge penalties or interest on your unpaid amount as follows:

  • A 1% late payment penalty is charged on the day after the due date
  • An additional 4% penalty is charged seven days after the due date — including late payment penalties (LPP)
  • UOMI may be charged from the day after the due date – UOMI will be charged daily until you have paid your total tax amount, including late payment penalties and any accrued interest.

What is tax pooling?

Tax pooling is unique to Aotearoa, with Tax Management New Zealand (TMNZ) being the first and largest tax pooling business. Essentially it allows tax paying businesses to pool their provisional tax payments in an account held by a registered tax pooling intermediary like TMNZ. This way, we offset one business’ underpayments by another’s overpayments. Think of it as business helping business!

Because we’re able to backpay your unpaid tax, it is no longer considered a ‘late payment.’ Meaning you avoid the IR penalties and fees on any missed tax payments.

With TMNZ, you have the flexibility to make a one-off payment or set up a regular instalment arrangement, giving you up to 13 months to pay your provisional tax. Additionally, if you’ve missed your terminal tax date, TMNZ can still help reduce interest costs and eliminate late payment penalties.

How about for historic payments from Inland Revenue reassessment notices?

TMNZ can also assist taxpayers with historic income tax payments and other tax types such as GST and PAYE if you receive a notice of reassessment from Inland Revenue. You have 60 days from the date the Inland Revenue issues this notice to use tax pooling.

What’s the catch?

Paying provisional tax through a tax pooling intermediary such as TMNZ lets you pay what you owe at a time in the future that better suits your business, or take advantage of instalments to avoid the provisional tax late payment penalty.

There is some interest to pay – but this is much lower than Inland Revenue’s interest on tax paid late or what you will incur if you use your business overdraft or get an unsecured loan. Tax pooling wipes the late payment penalties.
All you have to do is tell the tax pooling provider the amount of tax that is due and when or how you would like to pay it. They take care of the rest and even notify Inland Revenue of your arrangement. Easy-peasy.

Save yourself the tax trouble. Find out more.

If you’ve missed your provisional tax payment or are struggling to meet your tax obligations, you’re not out of luck.

TMNZ can help ease the financial strain of late payment penalties and provide much-needed cashflow relief. Contact your accountant or tax agent and let them know you want to pay your missed or underpaid provisional tax using TMNZ tax pooling. Or get in touch with us directly to explore your options and take control of your tax payments.

Don’t let a late payment penalty derail your business. With tax pooling from TMNZ, you can navigate the challenges of tax season with confidence and peace of mind.

Contact our team to take advantage of tax pooling today.