Kiwi business owners are all too familiar with the concept of provisional tax, and for many, paying it can be a bit of a chore.
One of the biggest issues people face is the IR’s inflexibility. Inland Revenue (IR) sets the dates you have to pay, and you’ve got no choice but to follow their lead.
No consideration is given to the time of year, business cashflow, or seasonal circumstances. After all, no one wants to pay a big lump sum when cashflow is tight.
The IR model doesn’t consider whether businesses are light on cash, have an urgent need for money, or a better use for their funds. You simply have to pay up or face the penalties — with IR interest on top of late payment fees.
But there’s one thing you should know about paying provisional tax. There is a better, easier way: tax pooling.
Tax pooling gives you more choice over your tax and lets you make payments on your terms without incurring the IR’s wrath.
The option has been available to New Zealand provisional taxpayers for more than two decades.
Since 2003, thousands of businesses have been paying provisional tax through tax pooling providers like TMNZ. We let you pay what you owe at a time that suits you.
The best part? Tax pools are IR-approved.
So, how does a tax pool work for paying provisional tax?
A tax pool is all about balance. Some businesses in our pool may end up overpaying their liability. These overpayments help other businesses in the pool that need more time to pay. A collective approach.
Users of our tax pool do have to pay some interest, but it’s charged at a much lower rate than the IR’s interest or the rates you’d pay for taking out an overdraft with the bank. There are also no late payment penalties to think about.
All you have to do is tell us the tax amount due and when and how you’d like to pay. We’ll take care of the rest and notify the IR.
Why haven’t I heard about this before?
While tax pooling isn’t common knowledge among small businesses, it is considered best practice among many accountants and tax advisers.
How can I start paying provisional tax with tax pooling?
Discuss tax pooling with your accountant (or with one of our Premium TMNZ Accounting Partners) ahead of your next provisional tax instalment or if you’ve struggled to match business cashflow with your past payments.
Ask your adviser to download this free guide that provides simple information on how tax pooling works.
Want to learn more about tax pooling?
Get in touch, or book a tax pooling overview with one of our experts.