Minding your business: Seven good reasons to consider tax pooling

What is Tax Traders? 

Tax Traders is an Inland Revenue-approved tax pooling intermediary. One of our founding beliefs is that the benefits of the New Zealand tax system should be available to all taxpayers. We’re proud we get to make this belief a reality every day through tax pooling. 

What is tax pooling? 

Tax pooling is the framework Inland Revenue (IRD) established in 2003 to lessen the burden of the provisional tax regime for taxpayers. Essentially, taxpayers trade their payments with each other and everyone wins – taxpayers reduce their interest costs or increase their return – and the IRD gets their tax paid simply and on time. 

Instead of making provisional tax payments directly to your account at Inland Revenue, you deposit those payments into a tax pooling trust account at the IRD held by a trustee and operated by an IRD-approved tax intermediary, like Tax Traders. 

Once actual profit is known at the end of the year, if you have underpaid your provisional tax, you can buy tax to make up the shortfall with no penalties or interest from IR. If you have overpaid your provisional tax, any surplus you have paid can either be sold at a higher interest rate than paid at IRD, or refunded within a matter of days. You can also borrow at competitive interest rates allowing you to pay your provisional tax when it suits you. 

Who should use it?

Most of New Zealand’s large corporates, as well as 35,000 SMEs use tax pooling across the country every year. Tax pooling is a more cost-effective and straightforward way to handle your provisional tax payments, especially when compared to other forms of funding such as credit cards or overdraft facilities. 

If you enjoy flexibility and paying when it suits you, tax pooling could be the perfect option! 

What are the benefits of using tax pooling / why should my business use tax pooling? 

Using tax pooling allows you to take control of the cashflow for what is likely one of your biggest expenses. A few of the other benefits are:

• Late payment penalties are eliminated.
• Plan your tax payments in a way that suits your business cashflow.
• Returns on overpaid tax can significantly exceed the Inland Revenue rate.
• Refunds on demand and paid within three to five working days (subject to AML documentation).
• Reduce interest charges for underpaid tax by up to 33%.
• The ability to swap payments between payment dates for optimal tax savings.