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, Inland Revenue (IR) doesn’t factor in these seasonal challenges. IR charges taxpayers 5.04% late payment penalties and 10.91% use of money interest (UOMI) if tax is not received on the due date (as at November 2024).
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 IR-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. 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 IR account administered by the Guardian Trust. Guardian Trust instructs the IR to transfer the tax into your IR account when you repay the $5,000 principal in six months’ time.
The IR 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? Learn more about our tax finance options today.
Find our latest resources on tax pooling and calculating tax using the Standard Uplift method here.
TMNZ: The ultimate cashflow flexibility tool for your business
In tough economic times, it can be hard for businesses to stay on top of cashflow and juggle their tax liabilities. For companies and sole traders dealing with fluctuating cashflow and provisional tax headaches, there’s an easier way to manage your obligations—tax pooling.
Did you know TMNZ’s tax pool can help you manage your tax by matching your cashflow forecasts with your provisional tax payments? And you can use tax pool deposits as an alternative funding source when cashflow is tight.
How we can help
TMNZ is an Inland Revenue (IR)-approved tax pooling provider, meaning you can use us to pay income tax on your behalf at a time that suits you. We offer greater flexibility over how and when you pay provisional tax.
First, you’ll need to think about your cashflow forecast. If you’re unsure how to put one together, read our cashflow management guide.
Once you’ve got your cashflow projection, we can work together to figure out the best time to pay your provisional tax. From there, all you need to do is tell us your tax amount owed, the date it is due, and how you would like to pay.
When your tax bill arrives, we’ll transfer the amount required to IR on your behalf as a time-stamped payment. IR will treat your tax as if it was paid on time, eliminating the risk of being charged interest or late payment fees. Simple.
A working capital solution
TMNZ’s payments to IR mean you can keep money in your business and use it at the times of the year you’ll need it most. You can top up your payments later into our tax pool at any time.
Tax pooling is a perfect solution for businesses worried about future cashflow and looming obligations. By partnering up with us, you’ll have total control over your tax bill, rather than working around IR’s strict deadlines.
With no more late fees and interest charges from IR to think about, you can get on with running your business. There will be no need to scrape together funds in the middle of holidays or quiet periods to meet IR’s deadlines.
TMNZ can also save you money by avoiding penalties and interest charges if you’ve missed or underpaid tax. We charge much lower interest rates than the penalties imposed by IR if you’re overdue.
We're a line of credit
Another amazing TMNZ feature is that we can be a line of credit for your business.
If you’ve deposited funds into our tax pool but find yourself short on cash, you can withdraw that money whenever you want to use it as working capital.
If you’ve paid provisional tax into our pool, you’ll have access to a working capital facility up to the value of your deposit. This provides even more flexibility for you and your team to get through a cash crunch and stay on top of debt management.
We can offer much cheaper interest rates than bank loans, overdrafts, or unsecured loans, meaning money withdrawn from our pool is better for you and your business, putting you in a stronger position at the end of the year.
Ready to learn more about the benefits of tax pooling?
Download our guide to Better Cashflow Management for top tips on managing cashflow throughout the financial year.
If you’re ready to take control of your tax and gain access to a valuable line of credit for your business, find out more at by reading our Tax Pooling 101 page to learn more about the full range of benefits of being in our pool.
Then talk to your tax adviser about TMNZ tax pooling to take away your tax management worries.
How TMNZ tech takes the pain out of tax
As New Zealand’s first ever tax pool, we’re proud of our long history of innovation. It’s at the heart of everything we do, and we’re always looking for new ways to simplify tax.
Technology has been at the forefront of our efforts, whether it’s rolling out new features for our customers, adding new functionality online, or partnering with forward-thinking digital platforms.
Recently, we’ve rolled out some amazing tools to help our customers and their accountants easily manage income tax.
Discover our top tech solutions to help you take the pain out of tax time, including tools to cut down on admin, share data between platforms, and get instant information on things like tax swaps.
Direct Inland Revenue Integration
TMNZ’s online dashboard is fully integrated with Inland Revenue (IR), meaning taxpayer information held by IR can be seamlessly shared on our platform, to make accountants lives easier.
In the past, accountants had to deal with multiple systems and spreadsheets to find accurate IR information. Integration means this admin work is no longer required.
Inland Revenue and TMNZ systems are directly connected so that key IR information is automatically populated on our dashboard. All relevant IR data, including Residual Income Tax figures, filing dates, and direct IR transactions appear on the TMNZ dashboard once you’ve logged in.
Thanks to IR integration, accountants can save time and reduce admin work. Direct IR integration also removes the risk of manual errors as clients populate information from one platform to another, making the process much more efficient.
IR information is fed into our calculator to help you determine your (or your client’s) tax position as quickly as possible.
Kathleen Payne, Partnerships Director at TMNZ, says:
“Following IR integration, all the data you need for your calculations goes straight onto our dashboard. All you have to do is put in the current year’s position that IR might not know yet, and everything is calculated without further data entry.”
If clients need any assistance with our direct IR integration, then TMNZ's friendly support team is on hand to help. And you can find out more about IR integration here.
Taxlab integration
Our systems are also fully integrated with Taxlab, the cloud-based tax software system designed specifically for New Zealand accountants.
Taxlab integration is easy to set up and use. Once you’ve completed the process, TMNZ transactions will appear on the Taxlab platform. Clients no longer need to use different systems to calculate their tax position.
“Accountants will get a complete picture of all TMNZ transactions sitting against their clients’ tax year,” Kathleen says.
Like IR integration, the setup couldn’t be simpler:
- log in to Taxlab, go to ‘Settings’, and add TMNZ as a connection
- you’ll then be directed to TMNZ to log in and confirm
- from there, you’ll be able to view TMNZ tax pooling information, including a full history of purchases, deposits, transfers, and tax payments.
Integration with Taxlab reduces the time and effort spent sharing information across the two platforms, giving tax agents even more time for their valuable client work.
Group Optimiser
If you’re a busy accountant in public practice looking to manage the tax year for groups of clients, TMNZ’s Group Optimiser tool is tailor-made for you.
This innovative feature enables accountants to calculate the position of several taxpayers and create multiple transactions at once.
Used alongside IR integration, Group Optimiser can make tax calculations even simpler.
Kathleen adds:
“Instead of having to prepare spreadsheets for each member in a group and then decide who has overpaid or underpaid tax, agents can use our calculator to enter a small amount of information. Then, at the click of a button, Group Optimiser calculates how to use the tax across the group in the most effective way.”
Group Optimser is ready and waiting on the TMNZ dashboard. All you need to do is log in.
Upcoming Deadlines
The Upcoming Deadlines function on the TMNZ dashboard is another of our top tech features.
For accountants managing several tax pooling clients, the Upcoming Deadlines feature can be used to track taxpayers ahead of key dates.
Offering total visibility over client tax positions as deadlines approach, the tool suggests prompts and actions to finalise the year.
“It also gives accountants a control list to work through their clients and ensure everything has been finalised,” Kathleen says. “It’s a workflow and control function and will remind advisers about everything they need to do for their clients.”
Automated Tax Swaps
TMNZ’s automated Tax Swaps is our latest dashboard feature, enabling clients to get instant quotes and process swaps below the threshold*.
Tax Swaps allow clients to even out their provisional tax payments if they have overpaid on one date and underpaid on another, saving on IR interest costs.
With our automated Tax Swap service, clients will benefit from faster, more efficient processing
The best part? The Tax Swap function is DIY.
“It’s a self-service system,” Kathleen explains. “If a client knows the swap they want to do, our system will automatically say, ‘Yes, you can do it, and this is the interest you’ll get’. You won’t have to interact with us at TMNZ. You can do-it-yourself.”
“It’s super efficient,” she adds. “Clients will have certainty of the outcome, they’ll know how much interest they’ll have to pay, or what they can earn, in an instant.
“At TMNZ, we’re all about flexibility, and empowering our customers to make decisions at a time that suits them.”
Automated Tax Swaps launched recently, following our pilot with TMNZ's Early Adopter community in April.
Become an Early Adopter
Are you part of TMNZ’s Early Adopter community, who gets first access to all our latest tech features?
Early Adopters enjoy the benefits of our new products and enhancements before anyone else, with support and training to help you make the most of new tools.
As an Early Adopter, you can share feedback and experiences to help us develop the best tech possible for accountants and clients.
“We love working with people to create the best tax solutions possible,” Kathleen adds. “Our Early Adopters are highly motivated, creative people who want to help us get even better.”
If you’re a tech savvy tax pooling user in an accounting firm, become an Early Adopter in a few simple steps:
- login to your dashboard
- Select your firm
- select ‘Early Adopter Programme’, from the left-hand menu
- review and accept the Terms and Conditions presented
- click the ‘Sign up’ button.
To learn more about TMNZ’s latest tech developments, head to our Innovative Tax Technology page or contact our support team today.
*the threshold is subject to change depending on market conditions.
Missed your latest provisional tax payment? How you can find relief
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, IR 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 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 IR 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 IR. You have 60 days from the date the IR 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 IR'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 IR 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.