Image: Tax refund

How you can use tax pooling like a savings account

In business, cash is king, and being able to access funds quickly in a crisis can mark the difference between success and failure. In an unpredictable and volatile world, having the ability to access cash during challenging times can be priceless.

Just ask the taxpayers who were able to access provisional tax payments they had deposited in the TMNZ tax pool when COVID-19 brought the world to a standstill.

With tax pooling, companies can easily request refunds of provisional tax payments they have made at the year to date without waiting to file their tax returns. They can receive their refunds within a matter of days.

Tax can be one of the largest expenditure lines for a business, so flexibility is vital.

In this economic climate, it’s far from ideal to have large sums tied up with the IRD.

What if you can’t access the money in an emergency?

What if your profitability projections trend down over the year, meaning you’re likely to overpay?

For taxpayers with a 30 June year-end, the first instalment of provisional tax is due on 28 November. Every business and sole trader should ask themselves the questions above, especially if their work is seasonal or cyclical in nature.

Businesses should also think about the accessibility of their funds if their income is difficult to predict or fluctuates due to factors such as commodity prices, adverse weather events, or the exchange rate.

Accessible tax money

Depositing tax payments into a tax pool can form part of an effective risk management strategy in times of uncertainty.

Look at it like depositing into a savings account with the added benefit of eliminating late payment penalties and IRD interest. You can still access your funds if you need to, you’re covering yourself for tax time and possibly extending your time to pay.

How depositing provisional tax into a tax pool works

Tax pooling operates with the blessing of the New Zealand tax department. TMNZ has been a registered provider of the service since 2003.

Companies deposit their provisional tax payments into a shared pool instead of directly into their own IRD account.

Each payment is date stamped as at the date it is made into the pool (e.g., 28 November). Funds are held in an account at the IRD. This account is managed by an independent trustee, Guardian Trust.

A taxpayer holds their payments in the pool until it instructs TMNZ to transfer their deposits to their own IRD account.

Taxpayers can request a refund from TMNZ of provisional tax deposits held in the pool at any time without having to file their tax return or an estimate with IRD.

Refunds may be subject to meeting anti-money laundering requirements. (Corporate taxpayers also need to be mindful of imputation credit account impacts when requesting a refund of tax they hold in the pool).

A taxpayer typically instructs TMNZ to transfer their tax deposits to their own IRD account once they finalise their tax return and know the amounts required at each instalment date to satisfy their liability for the year.

As the tax being transferred from the TMNZ tax pool to a taxpayer’s IRD account has been date stamped to when it was originally paid into the pool, IRD recognises it as if the taxpayer paid the whole amount on time.

This remits any IRD interest and late payment penalties showing on the taxpayer’s account.

Access previously paid funds

If you’re short on cash, tax pooling also allows you to temporarily withdraw deposits you hold in our pool.

You can access the amount of provisional tax funds you have deposited (minus an upfront interest cost). You also have the option to restore your deposit at the original deposit date once your cashflow situation has improved.

Buy some time

When preserving cashflow is high on the agenda, you can use a tax pool to defer upcoming provisional tax payments to a date in the future without incurring late payment penalties.

For example, someone with a 7 April terminal tax date could have up to 75 days from that date to settle their provisional tax.

Earn more interest if you’ve overpaid

If you have surplus tax remaining in the pool once you have transferred money to the IRD to satisfy your liability, you can earn interest above the IRD’s credit interest rate by selling the excess tax to other pool members that have underpaid for the year or have received a notice of reassessment from the IRD.

Please note that this is subject to market demand.

The purchasing taxpayer can reduce the interest cost faced on their underpayment significantly when applying this tax against their liability. This also eliminates any late payment penalties.

Overpayers earn more interest while fellow taxpayers pay less. Everyone’s a winner!

Find out more

To learn more about managing your provisional tax, check out our tax finance guide and cashflow management tips for businesses.

Alternatively, please get in touch with our friendly support team if you have any questions. We’re always happy to help.


Managing business cashflow in uncertain conditions

Looking back at 2021

In 2021 we learnt that emerging risks can quickly disrupt business operations, strategic plans and cashflow. The pandemic, combined with volatile markets and policy changes, put strain on New Zealand businesses. Revenues that were once predictable became unstable and COVID-19 related costs emerged.

The business environment in 2022

So, what can we expect from this year? Looking at economic indications and market conditions right now, the signs say 2022 will be another turbulent year, requiring careful financial management from business leaders.

With Omicron’s arrival in New Zealand, we are facing more restrictions that will impact business operations. The promise of open borders is looking doubtful, and this will put a strain on business looking to hire oversees talent, with labour shortages expected. Closed borders will also impact supply chains and certain industries like tourism, will continue to feel the crunch.

Stock markets are reacting to the impact of Omicron and other challenges, seen in the weak and falling S&P/NZX 50 Index[1]. Some businesses will be further exposed by interest rates rises, inflation expectations and tougher lending restrictions. RBNZ has signalled that lending will get even tighter from here.

For example, the Government’s recent changes to the Credit Contracts and Consumer Finance Act (CCCFA) are making it harder for business owners to access funding from their bank.  The additional information that lenders are requesting, and the security that they require for small business lending means access to working capital can be difficult.

Moving from consumer lending to consumer spending, the data shows that while consumer spending rose in December 2021[2], this was driven by the easing of lockdown restrictions before Christmas, and things will be different in 2022 due to Omicron-related restrictions.

With all of this considered, it’s not surprising that business sentiment is tracking downwards[3].

Managing cashflow through volatility

As 2022 shapes up to be another challenging and uncertain year, businesses will need to consider all the options for managing cashflow.

Tax pooling is a great solution for tax paying businesses which are uncertain about their cash flow.  Businesses can use Tax Management NZ (TMNZ) to keep money in their business or defer tax payments to a time that suits them, rather than the prescribed provisional tax dates from Inland Revenue.

The TMNZ tax pool can help businesses to reduce their exposure to interest if income tax has been miscalculated and tax pool deposits can be used as a line of credit if more help is needed. Also, if a business has missed or underpaid a provisional tax payment, TMNZ can help to save money by avoiding penalties and Use of Money Interest.

For businesses looking for working capital to pay their provisional tax, TMNZ can help – without any need for security and at interest rates well below traditional lenders. Businesses that have paid their provisional tax into the TMNZ tax pool have access to a working capital facility up to the value of their deposits.  This can be drawn upon when short-term working capital is required. 

For more guidance on cashflow management and the benefits of tax pooling, click here.

[1] S&P/NZX 50 Index, January 2022:

[2] ANZ-Roy Morgan Consumer Confidence, December 2021:

[3] ANZ Business Outlook Survey, December 2021:

New Survey Shows Inland Revenue Helpful, But Hindered

Press Release: Chartered Accountants Australia and New Zealand and Tax Management New Zealand

24 November 2021

Helpful, but hindered is the overarching finding in a new survey digging into public practice accountants’ experiences with Inland Revenue (IR).

Conducted by Chartered Accountants Australia and New Zealand and Tax Management New Zealand, the survey of 361 members in public practice asked a range of questions about the timeliness of IR’s service, the quality of interaction, and the business support on offer.

“Over 80 per cent of those surveyed rated their agent account manager interactions positively over the last 12 months, which Inland Revenue should be pleased with,” said CA ANZ NZ Tax Leader John Cuthbertson.

“The flipside is that it is taking much longer for Inland Revenue to resolve queries. The number of public practitioners who say it’s taking more than 6 days to resolve their queries has risen from 5 per cent of respondents, to 47 per cent.”

Despite this, accountants and tax agents are positive about not only their interactions with account managers, but also the support measures that Inland Revenue has administered.

“Accountants and agents across New Zealand are telling us that the tax support provided by Inland Revenue has been as effective this year, as it was last year,” said Tax Management New Zealand Chief Executive, Chris Cunniffe.

“It’s been another turbulent year for businesses, and the tax relief and support measures have made a positive difference. It’s just that our survey shows it can take a while to get through to Inland Revenue, and to have queries resolved and assistance locked in.”

The appreciation of Inland Revenue’s support was illustrated by 85 per cent of participants reporting that they had clients who utilised the remission of interest and penalties for late payment of provisional tax due to COVID.

Additionally, over 71 per cent of participants have found it easy or not difficult, to enter into or assist clients with an instalment arrangement in the past 12 months. This covers all types of tax, including GST, PAYE and FBT, not just provisional tax.

The increased level of scrutiny and information required to access COVID support was also felt by survey respondents.

“Approximately half the survey respondents said that accessing COVID support was harder than in 2020. That’s not surprising, given the public’s desire for more scrutiny about who received support, and the declarations becoming more stringent during this year’s lockdowns,” concluded Mr Cuthbertson.

Image: Miscalculate

Miscalculated your tax loss carry-back? Don’t worry – help is at hand

Tax pooling can reduce the interest cost a taxpayer faces significantly, if they have overestimated their loss under the temporary tax loss carry-back scheme.

Under the temporary Inland Revenue (IRD) scheme, those who expect to make a loss in the 2019-20 or 2020-21 income year can estimate that loss and use all (or a portion of it) to offset the profit made in the previous year.

A taxpayer can carry their loss back one year. For example, that would mean:

  • Losses from 2019-20 income year can be carried back to the 2018-19 income year.
  • Losses from the 2020-21 year can be carried back to the 2019-20 income year.

More information about the scheme and how it works is available here.

One of the major downsides of the loss carry-back scheme is a taxpayer falls outside of the IRD interest concession rules that apply for provisional taxpayers using the standard uplift method. This is because they must switch to the estimation method when determining the tax loss they wish to carry to back.

What happens if someone overstates their loss and receives a greater refund of tax for which they are eligible?

It means that normal IRD interest rules will apply for underpaid tax in the previous profit year.

For example, if someone with a 31 March balance date overestimated the loss they will make in the 2020-21 tax year and therefore has additional tax payable in the 2019-20 income year, IRD interest will apply from 28 August 2019, the date of their first instalment for the 2019-20 income year.

As of 8 May 2020, IRD charges interest of seven percent.

Moreover, the COVID-19 relief relating to remission of IRD interest is not available to taxpayers who use the temporary tax loss carry-back scheme.

How Tax Management NZ can help

If it turns out you have additional tax to pay in the 2018-19 or 2019-20 income year due to overstating your loss during the 2019-20 or 2020-21 income year, then help is available.

As an IRD-approved tax pooling provider, Tax Management NZ (TMNZ) can mitigate your exposure to the interest incurred on this tax.

That’s because we can apply backdated tax paid to IRD on the date it was originally due against your liability.

You make a payment directly to TMNZ comprising the core tax amount plus our interest. We then arrange a transfer of the tax you require from our IRD account to your IRD account.

The interest you pay TMNZ is significantly cheaper than what IRD charges for underpaid tax.

Once IRD processes this transaction, it will treat it as if you paid on time.

This clears any IRD interest and late payment penalties showing on your account.

Legislative deadlines do apply.

If you have any questions about tax pooling, please feel free to contact us. We’re here to help.


Back to the office? Not as you know it

Fresh out of lockdown in 2020, a lot of New Zealand companies were talking 'working from home as the new normal', but it hasn't exactly worked out that way, and a remote workforce is looking increasingly unlikely - or is it?

In July 2020 there were reports that the Auckland CBD economy would collapse due to the COVID-19 lockdown. In August, there were reports that an alarming number of shops in Wellington were boarded up – COVID-19 was speeding up the demise of the CBD which was already under threat from online shopping.

While many CBDs haven’t exactly bounced back with the spirit and energy of a child high on sugar, there are already signs that workers are returning to their city offices in growing numbers.

Heart of the City chief executive Viv Beck told Radio New Zealand in October that figures show people are returning to work in the city.

“The early spend data and pedestrian count information is showing that we are tracking quite positively overall. The domestic spending is picking up with more people back in the city, back at work and the return of events they're a significant attractor.”

How that compares to overseas

The Auckland experience is in alignment with studies overseas that have found that companies are bringing their staff back to the office, but with a bit more flexibility.

The October 2020 Vistage CEO Confidence Index survey of 1247 CEOs reports that even in the COVID-19 hit United States, 42 percent of CEOs are bringing employees back to the office. Twenty-eight percent will wait until 2021 – but return they will.

Some reasons why almost exclusively working from home may be short-lived is evidence that it leads to weaker controls, cybersecurity risks and a decline in innovation and company culture.

A growing response to the desire of more and more employees to work from home – less time stuck in traffic is a significant consideration – is the hybrid workforce model.

Defined as a blend of virtual and in-person work, the hybrid workforce model embraces the best of both worlds, and it seems to be gaining traction.

A recent Gartner, Inc. survey found that 82 percent of company leaders in the US plan to allow employees to work remotely, but only some of the time.

“Nearly half [47 percent] said they intend to allow employees to work remotely fulltime going forward. For some organisations, flex time will be the new norm as 43 percent of survey respondents reported they would grant employees flex days, while 42 percent will provide flex hours.”

In the UK, research by the Adecco Group UK and Ireland – Resetting Normal: Defining the New Era of Work study – reports that the majority (77 percent) of UK employees say a mix of office-based and remote working is the best way forward post COVID-19.

President and Country Head of the Adecco Group UK&I, Alex Fleming, says business leaders have a unique opportunity to hit reset on existing working patterns.

“Consider what, for instance, the new model of flexible working should look like. Crucially, these considerations should take into account what employees’ expectations are on these issues. Those businesses who welcome the new challenges and opportunities will be able to create working practices that will benefit both them and their employees for the long term, which will undoubtedly enhance colleague loyalty.”

How to grow your tax advisory through thought leadership

There's a so-called old piece of wisdom that says: “Absence makes the heart grow fonder.”

In reality, it is an old wives’ tale because it isn't true – not for relationships and not for tax advisory businesses. If you want more business, if you want more referrals and more growth, you need to up your 'visibility' in a way that is relevant to your audience.

Thought leadership is one way to achieve this goal.

The founder of the networking organisation Business Network International (BNI), Dr Ivan Misner, has what he believes is the most critical concept in networking.

“The VCP Process® – visibility, credibility, profitability – is a continuum,” he says. “Once you achieve credibility (and not before), you then need to start asking for referrals in order to achieve profitability. Profitability does not result automatically from visibility and credibility.”

What Misner is describing is true of marketing as well. While marketing – regardless of your methodology – will help you achieve visibility with your clients and potential clients, which in turn leads to credibility, you still need to do the hard work. In networking, it's asking for referrals. In your online marketing, it's about proving you are an expert, you are trustworthy, and you are good at what you do.

In this COVID-19 environment, opportunities to meet people face-to-face and interact personally to clinch new business and maintain existing business, are reduced. There is more emphasis on digital ways of working, shopping and socialising. While many accounting firms were dealing with the disruptions brought to reporting and compliance (and the rise of greater emphasis on advisory), COVID-19 is accelerating the change.

In this new climate, tax advisory businesses are advised to grow their online presence and visibility – to expand their digital footprint – in a way that establishes their credentials as expert and trustworthy.

Thought leadership can help you do that.

1. Be valuable 

We are living in an age of content shock. There is quite literally a deluge of content (list stories, how-to stories, updates and reports). For example, content about the increase in the provisional tax threshold is relatively common. It is important content, it is of value, but it is not valuable because it is common. By all means, it is the kind of content that any practice should be creating and sharing, but it won't earn you thought leadership.

Thought leadership comes from creating content – blogs, podcasts, opinion editorials, videos et cetera – that are unique, and you achieve that by applying your unique expertise and interpretation to the events (like tax developments) going on around you. Always look to understand and communicate what it means for your audience at a granular level

2. Stand for something

Your clients and potential clients want you to have an opinion. It’s why they pay you. Thought leaders have an opinion, and they are not afraid to express it. If you try to be everything to everybody, you end up being nothing to nobody. 

3. Aim for relevance

A content piece about how to improve cashflow is of value and also a common theme. Most companies, consultancies, banks and accounting firms have content about this. One way to differentiate your content and improve engagement is to add relevance by referring to the events and circumstances of the day.

For example, 'Maintaining cashflow this COVID-19 Christmas’ is current and timely. It is relevant because it refers to the issues of the day. Commentary about everyday problems and developments on the tax front should always be made in the context of the times in which we live.

In summary

It's not easy to 'stick your neck' out and establish your expertise, authority and trustworthiness through thought leadership, but nothing worthwhile is ever easy. 

Whether you get more business from referrals or other marketing and sales methods, thought leadership will benefit your practice because it says that you know what you’re about.

Three tax pooling solutions for businesses impacted by COVID-19

Image: Solved Rubix Cube.

IRD has announced a suite of tax relief measures during COVID-19 to help struggling businesses.

However, a tax pooling provider such as Tax Management NZ (TMNZ) offers some solutions of its own for those wishing to manage cashflow, facing uncertainty about their profitability or needing access to funds during this difficult economic time:

  • Provisional tax payment deferral.
  • Reducing exposure to interest if someone miscalculates their income tax.
  • Using tax pool deposits as a line of credit.

Below we explain how these three tax pooling solutions work. We also compare them to IRD’s equivalent offering at this time.

1. Provisional tax payment deferral

Alternative to

IRD’s remission of interest if someone is unable to pay their tax on time.

Suitable for

Businesses who cannot pay on the prescribed instalment date due to cashflow constraints.

Drawback of IRD’s offering

At first glance, this looks pretty good. Even more so given IRD has the power to remit interest all the way up to 25 March 2022.

However, dig deeper and you will see its ability to wipe interest if a taxpayer fails to make a tax payment due after 14 February 2020 on time because of COVID-19 is discretionary.

That’s important to note.

Whenever discretion is in the mix, inconsistencies can arise and we have seen a number of these already.

There are also a few hoops to go through in terms of:

  • Requesting the relief as soon as possible.
  • Proving eligibility.
  • Providing accounting and financial information to support a claim.
  • Maintaining the agreed payment plan set by IRD to ensure there is no default. Remember, this is not a tax holiday. There is an obligation for someone to pay what they owe as soon as practicable.

TMNZ’s solution

For those wanting certainty of outcome or less hassle, tax pooling is a better option.

Indeed, someone wanting to manage their provisional tax payments in a way that better aligns with their cashflow requirements can defer an upcoming payment to a date in the future with TMNZ, without having to worry about late payment penalties.

For a taxpayer with a 31 March year-end, they would have up to 22 months from the date of the first instalment (28 August 2020) of the 2020-21 income year to settle their provisional tax.

That means payment would not need to be made until mid-June 2022.

Acceptance is guaranteed with tax pooling. No security or additional information is required.

There are a couple of ways to pay with TMNZ.

Someone can pay a fixed interest fee upfront and then the core tax at an agreed future date or make a one-off payment of interest and core tax when they figure out their liability.

They also have the option of paying what they owe in instalments.

TMNZ’s interest is much cheaper than the seven percent IRD otherwise charges if someone does not make a payment on time.

This cost may be negligible given a tax pooling arrangement is easier to set up, offers more payment flexibility and gives someone peace of mind at an uncertain time.

2. Reducing exposure to interest if someone miscalculates their income tax

Alternative to

IRD’s remission of interest on underpaid provisional tax for the 2020-21 income year for those using the standard uplift or estimation methods who are impacted by COVID-19.

Suitable for

Businesses who are uncertain how their year will play out due to the global pandemic.

Drawbacks of IRD’s offering

IRD’s recently announced relief is only for smaller- and medium-sized businesses with a liability of less than $1 million who can demonstrate their ability to forecast what they owe for the year at one or more provisional tax dates was “significantly adversely affected” by COVID-19.

In other words, any underpayment needs to be due to a change in circumstance that is totally out of their control (i.e. the border reopening), not human error. Those who have tools to forecast what they owe – as well as those who make no effort to forecast – are unlikely to qualify for the remission.

Someone not impacted by COVID-19 is expected to pay on time and in full.

The other thing to note is IRD will decide who qualifies for relief on a case-by-case basis after a taxpayer files their return for the 2020-21 income year.

Again, this is a discretionary power.

That poses a significant risk if someone is touch and go as to whether they meet the criteria for assistance. After all, if IRD declines their application, they will be up for IRD interest from the date of their first instalment for the 2020-21 income year.

TMNZ’s solution

A taxpayer facing uncertainty over their profitability for the upcoming year who does not want to pay provisional tax based on an uplift calculation from a pre-COVID-19 time has another option if they are unlikely to qualify for this remission.

They can make their provisional tax payments based on how their year is unfolding – and then use TMNZ to wipe late payment penalties and reduce the interest cost they face if they end up underpaying their tax.

We offer significant savings on IRD interest.

TMNZ let’s a taxpayer apply provisional tax that was originally paid to the tax department on the date(s) it was originally due against their liability.

As such, IRD treats it as if they paid on time once it processes this their tax pooling transaction. This eliminates any late payment penalties.

A taxpayer has up to 75 days from their terminal tax date for the 2020-21 income year to pay any underpaid provisional tax with TMNZ.

3. Using tax pool deposits as a line of credit

Alternative to

IRD’s temporary tax loss carry-back scheme.

Suitable for

Taxpayers who hold deposited funds in TMNZ tax pool in urgent need of cash.

Drawbacks of IRD’s offering

Under the temporary tax loss carry-back scheme, a taxpayer who expect to make a loss in either the 2019-2020 or 2020-2021 income year will be able to estimate that loss and use all (or a portion of it) to offset any profit made in the previous year.

This allows those who need cash urgently to receive a refund of any income tax paid in the previous year.

However, some taxpayers are nervous about using the regime as they are uncertain how the 2020-21 income year will play out.

There are consequences if they overestimate the loss they are carrying back and this results in tax payable in the previous profit year.

In a nutshell, someone will incur IRD interest all the way back to the first instalment date of the profit year.

This is because they have to file an estimate with IRD in order to use the scheme. That subsequently takes them out of the interest concession rules that apply for standard uplift taxpayers.

TMNZ’s solution

Tax pooling allows someone short on cash to temporarily withdraw deposits they hold in the pool.

A taxpayer receives from TMNZ an amount equal to their deposited funds (minus an upfront interest cost), while having the option to restore those deposits at their original deposit date(s) when their cashflow situation improves.

Unlike the temporary tax loss carry-back scheme, there is no need to be in a loss position to access funds.

The ability to stay within the standard uplift interest concession rules also remains intact as there is no requirement to file an estimate with IRD.

Someone needs to give consideration to their imputation credit account balance before withdrawing any tax pool deposits.

It’s also important to note that funds taken out of the pool switch from own to purchased funds.

That means to reinstate the deposit(s) at their original dates, a taxpayer must have paid back and transferred the core tax from the tax pool to their account at IRD within 75 days of their terminal tax date for that tax year.

About TMNZ

TMNZ operates with the blessing of IRD and under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994.

Not only are we New Zealand’s first and oldest tax pooling provider, it was our company founder, Ian Kuperus, who came up with the concept and worked with officials to set up a framework.

TMNZ has been creating a better tax environment for businesses since 2003.

For more information about tax pooling, please feel free to contact us.


GST ratio timeframe extended

Image: Smartphone calculator

IRD has extended the timeframe for taxpayers to elect to use the GST ratio method in the wake of COVID-19.

They now have until 19 August 2020 or the day before the start of their 2020-21 income year, depending on which is later, to opt in.

Normally someone who is eligible to calculate their provisional tax on this basis must choose to do so before the start of their new tax year.

For example, a taxpayer with a 31 March balance date would have to inform IRD they wish to use the GST ratio method for their 2020-21 income year on or before 31 March 2020.

However, IRD recognises that COVID-19 may have made it difficult for someone to make this election within that required timeframe and has decided to grant more time.

They are also giving someone 10 working days to make their provisional tax payment(s) once they are notified of their GST ratio percentage.

If a taxpayer completes payment within that timeframe, IRD will waive any penalties and interest.

What is the GST ratio method?

The GST ratio method lets someone pay provisional tax based on a percentage of their taxable supplies.

A taxpayer can choose to use this calculation if:

  • Their income tax liability for the previous year wasn’t more than $150,000.
  • They file their GST returns monthly or every two months.
  • They aren’t operating as a partnership or a look-through company.

IRD calculates the GST ratio percentage figure by dividing the previous year's income tax liability by the total taxable supplies for the corresponding income year.

Someone using this method pays provisional tax six times a year.

COVID-19: IRD extends tax pooling deadline

Image: Hour glass

Updated 19 June 2020

Anyone impacted by COVID-19 will have 365 days after their terminal tax date to settle 2019 income tax arrangements with TMNZ, subject to meeting certain criteria.

IRD has used its new discretionary powers in s6I Tax Administration Act 1994 to extend the legislative deadline after recognising the cashflow difficulties some taxpayers face in the wake of the global virus and the Government’s response to it.

It means those with a terminal tax date of 7 April 2020 now have until 7 April 2021 to satisfy their Flexitax® or Tax Finance arrangements for the 2019 tax year.

Normally they have just 75 days after their terminal tax date to pay.

For taxpayers with a different terminal tax date, the extension to settle 2019 income tax will apply if their 75th day fell during a period that was impacted by COVID-19.

That means those with 15 January 2020, 7 February 2020, 7 March 2020 and 7 April 2020 terminal tax dates can request extra time to pay.

TMNZ welcomes IRD’s decision.

We wish to thank officials at the department for recognising the impact COVID-19 is having on our clients in relation to settling their 2019 income tax obligations within the required timeframe, as well as engaging with us to come up with a solution.

Eligibility criteria

The extension is subject to a taxpayer completing an application form and meeting a couple of conditions.

Firstly, they must have experienced – or expect to experience – a significant decline in actual or forecast revenue due to COVID-19 between January 2020 and July 2020 that either:

  • Prevents them from satisfying their existing arrangement for the 2019 tax year with TMNZ within the normal legislative timeframe; or
  • Meant that prior to this extension, they were unable to enter into an arrangement for the 2019 tax year with TMNZ.

If someone has received the Government wage subsidy, then this will satisfy the requirement of a reduction in revenue due to COVID-19.

If they have not, they will need to confirm that, after meeting their on-going business expenditure, they DO NOT have any of the following immediately available to pay their tax obligation:

  • Cash reserves
  • Insurance proceeds
  • Banking facilities.

Secondly, a taxpayer must have their TMNZ arrangement for the 2019 tax year in place on or before 21 July 2020. Our recommendation is that you set this up as soon as you can.

Thirdly, they will need to supply a cashflow forecast (or other comparable information if they are a small business).

IRD is asking us to collect and check this forecast as it wants proof that the taxpayer requesting an extension will have the funds available to meet their liability within the new timeframe.

Someone must supply this forecast even if they received the wage subsidy.

Many clients and tax agents will be able to access this through their accounting software. If someone does not have a cashflow forecast template, here is one that IRD sends those wishing to enter into a payment plan.

Exception to the cashflow forecast criteria

If a taxpayer intends to settle their tax liability before 21 July 2020, they DO NOT need to provide a cashflow forecast.

Payment frequency

We CANNOT accept arrangements to delay the payment of all your outstanding tax until the last day.

IRD wants taxpayers to make regular payments towards their liability. These payments can be made weekly, fortnightly or monthly.

Please contact us if you have circumstances that will make this difficult.

We can vary arrangements part way through if required.

A taxpayer's final payment must be received no later than 365 days past their terminal tax date for the 2019 tax year.

TMNZ’s interest rates for extension arrangements are the same as they are for other transactions.

Key dates to note

The 365-day extension deadline will differ slightly for taxpayers with the terminal tax dates in bold. Please be mindful of this when completing the application form.

For those whose terminal tax date for the 2019 tax year is 15 January 2020, 365 days after this date is actually 14 January 2021.

This is because 2020 has an extra day due to being a leap year.

For those whose terminal tax date for the 2019 tax year is 7 February 2020, their actual 365th day is 9 February 2021.

There are two reasons for this.

The first is that 7 February 2021 falls on a Sunday. The second is Waitangi Day (6 February) is ‘Monday-ised’ to 8 February.

For those whose terminal tax date for the 2019 tax year is 7 March 2020, their 365th day is 9 March 2021.

This is because:

  • The due date for this 2019 terminal tax payment defaulted to 9 March 2020 as the seventh was on a Saturday this year; and
  • IRD has applied the 365-day extension from 9 March 2020.

The application process

You can find the extension application form here. Please complete and send this along with your cashflow forecast to

Someone can send us the completed application form immediately and provide the cashflow forecast in the next three weeks.

Don't hesitate to call

The process around this extension has been introduced at short notice, so please bear with us.

As always, if you have any questions, feel free to contact your TMNZ account manager or our customer support team. We're here to help.

Disclaimer: This article is correct as at 19 June 2020. It is subject to change. TMNZ will update this article as and when it receives new information from IRD regarding the extension of the 2019 tax pooling deadline. We encourage readers to check this page regularly.

Tax loss carry-back scheme: Important considerations

Image: Primate thinking

Standard imputation (ICA), ownership continuity and grouping rules still apply under the new tax loss carry-back scheme, while anyone who overestimates their loss will face IRD interest (UOMI) from the date of their first provisional tax instalment for the previous year.

Moreover, company profits already paid out via shareholder-employee salaries or dividends are unable to be reversed to take advantage of the scheme.

A basic overview of the scheme

Under the temporary scheme, taxpayers who expect to make a loss in either the 2020 or 2021 tax year will be able to estimate that loss and use all (or a portion of it) to offset any profit made in the previous year.

This allows those who need cash urgently to receive a refund of any income tax paid in the previous year.

It applies to companies, trusts, and individuals (other than those deriving only PAYE income) and those that operate through partnerships and look-through companies.

The legislative reference is sIZ8 Income Tax Act 2007.

Here are some of the things you need to consider before electing to use the scheme.

The ICA rules

Be mindful that standard ICA rules apply as part of the tax loss carry-back.

That means in order to obtain a refund of income tax, a taxpayer must have an ICA credit balance at the end of the most recently ended tax year (i.e. 31 March 2020) that is at least equal to the refund amount.

Alternatively, they can complete an interim ICA return up to the date of their refund request.

Provisional tax deposits held in a tax pooling account that are refunded under the loss carry-back scheme will be subject to the imputation debit rules that normally apply for pooling.

Given the potential exposure to imputation penalty tax of 10 percent and UOMI, the timing of tax pooling refunds due to a loss being carried back should be considered on an ongoing basis to mitigate this risk. 

The results can be catastrophic if they’re not.

We strongly encourage you to contact us before you refund any balances from the pool.

Ownership continuity and grouping rules

The ownership continuity requirements that relate to the loss carry-forward provision, and the normal grouping rules, also apply under the tax loss carry-back scheme.

This means a company must have maintained at least 49 percent common ownership throughout the loss year and preceding profit year.

For entities part of a group, the group must have retained 66 percent common ownership throughout the loss year and the preceding year.

That said, there are provisions in the tax loss carry-back legislation that deal with part years in the ownership continuity period.

IRD has examples of this in its commentary for the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Bill.

Time bar rule

IRD can reassess both the loss year and the preceding profit year at the same time – even if the preceding profit year is time barred.

That is something to keep in mind.

Situations where the scheme cannot be used

A taxpayer must have taxable income in the previous year.

Given that, a company that has already paid out its profit via shareholder-employee salaries will not have any taxable income to which they can apply future losses they wish to carry back.

This is also the case if the taxpayer has already distributed its profits as a dividend or made a subvention payment.

Therefore, they cannot use the scheme.

Taxpayers who have ringfenced rental losses will not be able to carry back losses either.

It's the same with multi-rate PIEs. This is because they have a cash-out for losses that provides immediate tax relief in this situation.

Situations where it will offer limited benefit

A taxpayer can only carry back losses one year (e.g. from the 2021 tax year to the 2020 tax year).

As such, there will be situations where the scheme will only free up a small refund of income tax.

Example one

Tax year Taxable income
2019 Massive profit
2020 Modest profit
2021 Huge loss forecast

Someone can only carry back the huge forecast loss for 2021 to the extent of the taxable income in 2020. As you can see, this is considerably lower in comparison to the 2019 tax year.

This will result in a very small refund of tax under the scheme.

Example two

Tax year Taxable income
2019 Massive profit
2020 Small loss
2021 Huge loss forecast

Someone can only carry back the small loss from 2020 to the 2019 year. The huge forecast loss from 2021 cannot be utilised as part of the scheme.

Once again, this will result in a small refund of tax.

Here’s another thing to remember.

If the taxpayer is part of a wholly owned group of companies, the loss amount they can carry back is limited to the amount that cannot be offset against the profits within that group during the loss year. In other words, the loss must be used within the group first during the loss year.

UOMI ramifications

A taxpayer can re-estimate provisional tax in the previous year as many times as they like under the scheme. They can keep doing so up until the date they file their return for the loss year (or the date by which they must legally file this return if this is earlier).

However, re-estimating provisional tax means the UOMI rules in s120KB Tax Administration Act 1994 will apply.

That means if someone overestimates their tax loss carry-back for the loss year – resulting in tax to be paid later due to receiving a larger refund to which they were entitled – they will be liable to pay UOMI from the date of their first provisional tax instalment in the preceding profit year.

Interest will be charged on the difference between the income tax they owe for the profit year and the income tax they paid in that year.

The income tax they owe for the profit year is based on the original taxable income for that year, minus the actual loss from the loss year. The tax they paid in the profit year is based on the original taxable income for that year, minus the total loss year refund they initially received due to overestimating their loss.

The amount on which UOMI is charged will be split evenly across the number of provisional tax instalments payable for the profit year.

Section 183ABAB of the Act – which gives IRD the power to remit UOMI for taxpayers who cannot make tax payments after 14 February 2020 due to COVID-19 – will not be able to assist.

TMNZ can help reduce UOMI

However, someone who is incurring UOMI due to overestimating their tax loss carry-back can use TMNZ to significantly reduce the interest cost on the additional tax payable if they are within 75 days of their terminal tax date for the profit year (or 60 days from the date IRD issues a notice of reassessment if the profit year is a closed income year).

Flexitax® allows them to apply backdated tax paid to IRD on the date it was originally due against their liability.

As such, IRD will treat the taxpayer as having paid on time once it processes this transaction, remitting any UOMI and late payment penalties incurred.

It’s a safety net for someone who has a ‘mare forecasting their loss.

It may pay to wait and see

For many taxpayers, the most recent tax year would have ended on 31 March 2020.

Up until the start of that month, when the impacts of COVID-19 really hit, everything was running smoothly. It’s quite likely their profitability was not significantly impacted.

But there’s a strong likelihood it will be during their 2021 tax year.

However, as it’s still early days in that year, having to estimate a loss to carry back to 2020 this far out is quite difficult.

Honestly, who really knows what the landscape will look like next month – let alone by 31 March 2021 – given the clouds of uncertainty lingering above the domestic and global economies in the wake of COVID-19?

The risk of incurring UOMI if they get it wrong means they may wish to err on the side of caution with their loss estimate and then re-estimate as the year progresses once the picture becomes clearer.

The other option is to hold off until later. That's what many appear to be doing at this stage given the low uptake.

Yet a downside of playing it safe or waiting a little longer is the taxpayer may not receive the full cashflow injection they are seeking right now.

Does their desperate need for immediate funds outweigh the potential UOMI consequences down the track, or can they afford to wait?

That’s something a taxpayer is going to need to weigh up before opting in.

Don't forget tax pool deposits

For those holding provisional tax deposits in TMNZ’s tax pool who want access to their payments now – but don’t yet have the confidence to file a loss carry-back – there is another option.

They can take a line of credit against their deposits, for interest rates below three percent. They also have the option of restoring those deposits at their original deposit dates once their cashflow situation improves.

However, there are a couple of things to note.

For starters, the ICA position needs to considered first as the debit rules for pooling apply in this situation as well since the transaction is treated as a sale of tax.

The tax must also be paid back and transferred to IRD within 75 days after the terminal tax date for that tax period.

Nonetheless, it's something else to think about if a taxpayer requires cash in the wake of COVID-19.


The above are some things of which to be aware when it comes to the tax loss carry-back scheme.

For business owners, this IS NOT tax advice. We recommend you speak with a tax specialist in the first instance about your particular situation. The legislation is quite complex.

You can find one of our premium accounting partners here.