Corporate businesses with June balance dates will be aware of the 28 November provisional tax deadline fast approaching.
So, now’s the perfect time to start thinking about using tax pooling – not just to save on Inland Revenue interest and reduce risk, but also as a strategic financial tool for competitive advantage.
If you’re new to tax pooling, it’s worth knowing that it’s an Inland Revenue approved system to help New Zealand businesses better manage their provisional tax. Tax pooling has been around since 2003 and since then TMNZ has helped over 130,000 taxpayers to save more than $520 million, with our flexible and innovative tax payment solutions.
Essentially, tax pooling turns a fixed tax obligation into a flexible financial instrument, giving your company more control over its tax strategy and cashflow management.
Specifically for larger businesses with complex tax obligations, there are many strategic financial benefits. Here we’ve summarised our top ten positive impacts of tax pooling:
- Cost savings: Large businesses often have significant tax liabilities. Tax pooling can lead to considerable savings on Inland Revenue interest and penalties. Savings for some big New Zealand businesses are in the hundreds of thousands of dollars annually. Plus, businesses can even earn more on any overpaid tax.
- Working capital optimisation: Tax pooling allows businesses to retain large sums of working capital for longer periods, which can be strategically deployed for investments, acquisitions, or other high-return activities.
- Risk management: Large businesses face complex tax risks. Tax pooling can be an effective tool in an overall tax risk management strategy, providing protection against unexpected liabilities, reassessments, and penalties.
- Compliance benefits: Tax pooling can help maintain compliance across complex tax structures and simplify tax management processes.
- Reporting advantages: With tax pooling, businesses can improve financial reporting by providing more predictable tax expenses and potentially enhancing key financial ratios.
- Market considerations: For businesses heavily impacted by fluctuating markets, tax pooling can be beneficial for dealing with interest rate fluctuations, by allowing businesses to lock in rates in advance.
- Tailored arrangements: With a business’s specific tax situation in mind, tax payments can be structured around unique cashflows, rather than Inland Revenue’s standard dates. This flexibility gives more control over funds – from earning higher interest on overpayments to accessing funds as a fee-free line of credit or carrying them forward to future years.
- Direct integration: TMNZ is directly integrated with Inland Revenue, providing certainty and security around sensitive tax information.
- Scalability and growth: Tax pooling solutions can scale with a business’s growth and adapt to changing tax landscapes.
- Personal support: Our expert team of Chartered Accountants, tax lawyers and customer success specialists are on hand to provide you with personal support and guidance, when you need it.
Whatever your tax position – whether you’re looking to earn more interest on overpayments, need payment flexibility and want to avoid expensive banking facilities – tax pooling offers more control and better financial outcomes than paying IR directly.
Contact our team to discuss how these benefits apply to your business and to develop a tailored arrangement before the upcoming provisional tax deadline.