What is tax pooling?

An explanation of tax poolingfrom the tax pooling originators

What is tax pooling?

A quick explanation from the tax pool originators 

Tax pooling has helped thousands of Kiwi business owners save more, while enjoying real cashflow flexibility. Below you’ll find everything you need to know about how our revolutionary system can benefit you and your business.  

What is tax pooling?

A quick explanation from the tax pool originators 

Tax pooling has helped thousands of Kiwi business owners save more, while enjoying real cashflow flexibility. Below you’ll find everything you need to know about how our revolutionary system can benefit you and your business.  

Tax pooling is all about freedom and flexibility

Instead of paying Inland Revenue directly on a given date, you can pay into the tax pool (of an Inland Revenue-approved intermediary – i.e. us) whenever you like.

When your tax bill arrives, let us know and we’ll transfer the exact amount to Inland Revenue on your behalf. The second we do that, it’ll be considered “tax paid”.

It’s all about balance. Some businesses like to overpay their tax when they have the funds. Because of this, they’re actually helping cover businesses that need a little more flexibility with their tax payment arrangements. We like to think of it as business helping business.

Keep your cash flowing

When it’s time to settle your provisional tax, you can use funds from the tax pool.
And here’s where that balance we spoke about earlier comes into play…

If you’ve overpaid, brilliant. You’ve got another choice to make. Put that credit towards your next payment, sell it off (usually for much higher returns than Inland Revenue will offer), or have it refunded.

If you’ve underpaid, no problem. You can buy a little tax top up. And because that money has already been date stamped as paid on time, you’ll never see another late payment penalty. Not only that, but the interest we charge is up to 30% lower than Inland Revenue’s.

Want to know more? Get in touch and we’ll talk you through it.

A partnership that pays

Inland Revenue approved the use of tax pooling in 2003. Since then they’ve had nothing but good things to say about the benefits this revolutionary system brings to both government and business at tax time.

Today, Inland Revenue manage the registration of tax pooling intermediaries, of which we were the first, and (still are) the largest.

You're good to go! Tax pooling has been approved for managing voluntary or normal provisional tax payments, reassessments of income tax, and increased obligations of other tax types due to tax audits or voluntary disclosures - like PAYE, GST, FBT, NRWT and Terminal Tax.

Tax on your terms

With a tax pooling intermediary like TMNZ, you can smooth out your tax payments up to 75 days after your terminal tax date, so you have up to 22 months longer to pay your tax bill.

And your tax pooling arrangement is as flexible as you want it to be.

Flexitax

With TMNZ Flexitax, you can pay in small regular payments or lump sums when it suits you. No up-front payment and, so long as you settle your arrangement by the date TMNZ provides, no IR late payment fees or interest.

Tax Finance

Or, if you know when you’ll have the funds, you can defer your payment to a date in the future using Tax Finance. With Tax Finance, you can look ahead and match your tax payments to seasonal highs, aligning tax obligations with your cashflow forecast.

Tax Deposits

You can also make your tax work for you with TMNZ Tax Deposits. With tax deposited into the pool, you can earn interest on overpayments (more than you would through IRD), move the funds forward to the next financial year or even draw on it as a line of credit.

Get a quote

Tax on your terms

With a tax pooling intermediary like TMNZ, you can smooth out your tax payments up to 75 days after your terminal tax date, so you have up to 22 months longer to pay your tax bill.

And your tax pooling arrangement is as flexible as you want it to be.

Flexitax

With TMNZ Flexitax, you can pay in small regular payments or lump sums when it suits you. No up-front payment and, so long as you settle your arrangement by the date TMNZ provides, no IR late payment fees or interest.

Tax Finance

Or, if you know when you’ll have the funds, you can defer your payment to a date in the future using Tax Finance. With Tax Finance, you can look ahead and match your tax payments to seasonal highs, aligning tax obligations with your cashflow forecast.

Tax Deposits

You can also make your tax work for you with TMNZ Tax Deposits. With tax deposited into the pool, you can earn interest on overpayments (more than you would through IRD), move the funds forward to the next financial year or even draw on it as a line of credit.

Get a quote

FAQs

A tax pooling company helps clients manage their provisional tax payments effectively. All IRD-approved intermediaries operate under legislation detailed in the Income Tax Act 2007 and Tax Administration Act 1994.

Tax Management New Zealand (TMNZ) was the first to introduce tax pooling in New Zealand — the tax pooling originators. This innovation was not only a first in New Zealand but also globally, revolutionising how taxpayers meet their provisional tax obligations.

A brief timeline:

Penalties before 1987

Before 1987, taxpayers and businesses in New Zealand did not face penalties or accrue interest for late or missed provisional tax payments.

1987 – Introducing the interest rate regime

The introduction of penalties and interest costs in 1987 by Inland Revenue (IR) aimed to encourage compliance and timely tax payments. Consequently, taxpayers were charged high-interest rates on underpayments or late payments but only received low-interest rates on overpayments.

2003 – A brand new system

Tax pooling is introduced as a framework by Inland Revenue in 2003. Under the new system, taxpayers can deposit surplus tax payments into an account, known as a tax pool, administered by IRD-approved tax pooling intermediaries. The intermediary acts as a facilitator, matching the tax shortfall of one taxpayer with the overpaid tax of another. Tax payments made in this way are approved by IRD and treated as a payment made on the date it was paid into the tax pool. 

As a tax pooling intermediary, we collaborate with accountants and businesses to make tax payments easy. Tax pooling with TMNZ helps you meet your income tax obligations and avoid late payment penalties and interest charges. The best part? You receive more benefits and greater flexibility than you would paying Inland Revenue (IR) directly.

By using tax pooling, you can transfer tax payments from the pool if you aren’t able to pay your provisional tax on time. If you were to underpay provisional tax, IRD would charge you late payment penalties (LPP) and use of money interest (UOMI).

Tax pooling enables taxpayers to consolidate their provisional tax payments, offsetting underpayments with overpayments within the same pool. Because we’re able to backpay your provisional tax payments in this way, we’re also able to avoid the IR penalties and fees incurred as it is no longer considered a ‘late payment’.

Answers to your provisional tax questions

Learn how to calculate tax owed and avoid late provisional tax penalties with our free guide.

Here’s what every business needs to know when paying provisional tax.

Download free guide