Tax pooling is a way to pay provisional tax by either chipping away at what you owe in instalments or deferring the whole amount to a payment date that suits you, without incurring Inland Revenue late payment penalties or interest.
Tax pooling is an IR-approved service offered by a commercial provider and has been operating in New Zealand since legislation came into effect in 2003. Moore Markhams firms work with a number of different providers and can help you take advantage of this opportunity,
so get in touch.
How it works
You can pay income tax at a time or in a manner that suits you, at a much lower interest cost than what IR charges for unpaid tax and without incurring late payment penalties. If you find you have provisional or terminal tax owing and are low on funds (or have a better or urgent use for it), you can use tax pooling to either chip away at what you owe in instalments and/or pay the full amount later – all while avoiding interest and late payment penalty regime.
Instead of paying IR directly on set dates, you send payments to the tax pooling provider who then transfers the backdated tax to IR, so it’s as if you paid on time. This then eliminates late payment penalties and reduces IR interest cost by up to 30 percent.
It’s especially useful if you have seasonal or volatile income and have difficulty determining how much provisional tax you must pay for the year. You pay based on how your business is actually performing so your tax payments suit your business cashflow.