Paying tax when it works for you with TMNZ
Missed a tax payment? Cashflow tight and wanting to delay a provisional tax payment? There are options available to you to minimise the cost and let you have flexibility.
Tax Management NZ (TMNZ) is an IRD-approved tax pooling service that enables users to pay income tax at a time or in a manner that suits their cashflow. TMNZ’s interest charge is much lower than the IRD’s (currently TMNZ’s rate is around 30% lower than the IRD), and as TMNZ back-dates any payments to the due date, this eliminates any late payment penalties.
TMNZ can be used for both provisional and terminal tax, and is mainly used for the following circumstances:
- Paying missed or underpaid tax payments retrospectively
- Retrospective payments for reassessed tax obligations
- Delaying payment of tax obligations (perhaps due to cashflow restrictions)
The service that is used the most by our clients is called Flexitax, which is essentially like a floating overdraft for tax payments. To use this facility, Leech & Partners advise TMNZ the amount of tax and the due date of the payment. We then email you with the payment details (bank account number, reference, etc.) and you can make payments directly to TMNZ as and when your business has cash available. TMNZ will transfer these payments to IRD back at the correct payment date which eliminates the IRD late-payment penalty, and TMNZ will charge interest on the unpaid portion at a lower rate than the IRD would otherwise charge. The last date for payment using TMNZ is 75 days after your terminal tax due date.
For most of our clients TMNZ is best used as a tool for catching up on missed tax payments as above, however, it can also be a useful cashflow management tool that allows you to delay tax payments for a short time. We will always recommend using TMNZ if we feel it would be beneficial in your situation and can give you an indication of the savings that are available from using TMNZ and the administration cost involved.
If you have any questions or would like to know more about TMNZ and how it could benefit you, please contact us.
