Paying terminal tax with TMNZ

The terminal tax benefits of tax pooling.

Paying terminal tax with TMNZ

The terminal tax benefits of tax pooling.

Provisional tax payments with TMNZ

Tax pooling, explained.

Tax pooling has helped thousands of Kiwi business owners make the right provisional tax payments, at the right time.

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.

What is terminal tax?

Terminal tax is the difference between the residual income tax you have to pay for the year and the amount of tax already paid through provisional tax instalments, PAYE, or withholding tax.

If the tax paid by the end of the year exceeds your actual tax liability, then — good news! — you’re entitled to a tax refund. On the other hand, if the tax paid can’t cover the total tax liability, you must pay an additional tax called terminal tax.

Essentially, terminal tax is payable by businesses who haven’t paid sufficient provisional tax throughout the year to cover their actual income tax liability.

When do I pay?

What are New Zealand’s terminal tax due dates?

For taxpayers with the standard balance date of March 31, terminal tax due dates are as follows:

  • If you file your own tax return without using a tax agent, your terminal tax is due by February 7 of the following tax year.
  • If you use a tax agent with an extension of time arrangement to file your returns, your terminal tax is due by April 7 of the following year.

If your balance date isn’t 31 March, or you want to see your whole tax calendar at a glance, look here.

And if I pay late?

If you do not pay Inland Revenue terminal tax owed by the due date, you will be charged interest and late payment penalties. The penalty is calculated as a percentage of the outstanding tax liability and accrues daily until paid.

Already have a tax pooling arrangement in place with TMNZ? We’ll make sure your tax is paid on time from our tax pool, whilst offering you flexibility in how and when you pay it off.

An example of Flexitax

The set up

Let’s say you have a provisional tax bill of $28,000 due on 28 August . You might be thinking an overdraft (at bank interest rates) will help you avoid late payment penalties and IR UOMI.

There’s a better way

It’s called a Flexitax arrangement.

How it works

We’ll make the payment for you, using tax from the pool. This means you’ll be able to pay off your tax over the next 22 months in small, regular payments. Or, if you prefer, in large lump sums (depending on your cashflow).

The benefit

Not only have you avoided late payment penalties, but you’ll also pay interest at a floating rate (which is usually much more competitive than the rates offered by banks).

Ever wish you could choose your own tax dates?

You can! With TMNZ tax pooling, you can choose to either:

Pay in instalments with Flexitax

Flexitax helps smooth out your payments by giving you the option to pay provisional tax in lump sums or instalments up to 75 days after Terminal Tax. Meaning you can keep your cashflow where you need it most.

Learn more

Choose when you’ll pay with Tax Finance

Tax Finance gives you the freedom to make payments when you know your business will have the cashflow, essentially deferring your tax. And because you can choose any date up to 75 days after terminal tax, you can rest easy knowing you have the finance when you need it without incurring late payment penalties or Inland Revenue interest.

Learn more

An example of tax finance

The set up

Let’s say you have a tax bill of $36,000 due on August 28th. You have the money set aside but paying your tax bill now will mean cutting back on necessary costs and slowing down your business growth.

There is a better way

It’s called a tax finance agreement.

How it works

Instead of using that $36,000 to pay your tax right now, you can lock in a fixed interest rate and a set payment date up to 75 days after your terminal tax date. Doing this means your bill is now due next March (when you forecast a better cashflow position). We’ll then calculate the finance fee to this date, which you pay to lock in the rate.

The benefit

Come March, you can pay your tax bill without negatively impacting your cashflow or business. As far as IR is concerned, you’ve paid your tax on time, saving yourself from LPP and IR UOMI.

Explore tax finance

FAQs

Terminal tax is calculated by subtracting the provisional tax payments made throughout the tax year from the final income tax liability, which is determined by considering the total taxable income, allowable deductions, credits and any other tax obligations.

The difference between terminal and provisional tax lies in timing and calculation.

Provisional tax is often paid in three instalments throughout the year, while terminal tax is paid in one lump sum at the end of the year. Provisional tax estimates the taxpayer’s tax liability, which can be adjusted as more accurate information becomes available. A taxpayer only needs to pay provisional tax when their annual tax bill exceeds $2,500.

Terminal tax is calculated based on the actual taxable income for the year, considering deductions, tax credits and other tax obligations.

All the dates and terminology of tax can be confusing. But we’re here to help.

Some of the resources we offer include:

  • Learn more about tax liabilities
  • Discover insights on how to adjust balance dates
  • Find out more about paying provisional tax, including payment dates and the types of provisional payments, including the accounting income method, the estimation option and the ratio option.

Contact Us

Want to know more about how tax pooling could help your business?
Our support team (the largest in NZ) have all the answers.

Get in touch with us today.

Get in touch