If you’ve ever missed a tax payment or want to pay tax when it suits your cash flow, we have a solution for you. Talk to your accountant and we can discuss ways to reduce late payment penalties and interest and in some cases earn interest.
We do this by partnering with Tax Traders, an Inland Revenue Department (IRD) approved intermediary for tax pooling. We have been using them for a number of years now to help clients manage their tax and because we exclusively use them we get a preferential interest rate which further benefits you the taxpayer. Three ways to use Tax Traders are:
If you have missed a provisional tax payment or find that you have underpaid your tax when your tax return has been prepared, then we can arrange for you to buy tax at the correct payment dates. By paying the tax at the correct dates you save on interest and any late payment penalties that would have been charged.
It’s important to note that you can only buy tax for any given financial year up to 75 days after the date that terminal tax for that year is due.
When you have a tax payment due and cash flow is tight but you know you will have the funds to pay at a future date, you can finance your tax payment and choose the date that suits you for payment. You simply pay the interest up front and then pay your provisional tax at a maturity date you select – up to 12 months later, with additional time granted in some cases. If it turns out you don’t need to finance all of the tax, you will be refunded the finance fee on the tax not required.
If you want more flexibility with your tax payments, then you can deposit funds directly with Tax Traders on provisional tax dates or deposit funds when cash flow allows. When your tax return is prepared we can work out what tax needs to be paid and if you have overpaid you can earn some interest by swapping your payments with other taxpayers in the pool. You can then get the balance plus interest refunded. As IRD will often delay paying out larger refunds to taxpayers this gives you a lot more flexibility.
In all cases you pay Tax Traders directly and then they transfer the core tax to IRD at the dates specified. There is no minimum amount for tax pooling so no amount is too small. Any interest or fees you pay to Tax Traders are tax deductible.
Talk to your Accountant who will manage the whole process with Tax Traders for you. To learn more about tax pooling, see www.taxtraders.co.nz