The period after Christmas can be tough for many small and medium sized businesses.
According to more than half the respondents to a poll conducted by the Employers and Manufacturers Association, January to March is when they tend to experience cashflow constraints.
It’s hardly surprising, really. The period after Christmas is traditionally slow business-wise. Consumers are either enjoying their holidays or getting their finances in order following their festive season spending. Earnings will be down if businesses shut during the break. Others may also feel the pinch if they paid staff bonuses prior to the holiday season.
It is, therefore, understandable how having to make a provisional tax payment on 15 January might be a bit problematic for some.
Still, it does not change the fact that Inland Revenue (IRD) expects this payment to be made on time and will charge taxpayers late payment penalties of up to 20 per cent per annum and use of money interest (UOMI) of 8.27% per cent if the tax is not received on the due date.
However, those who wish to free up cash at a time when they need it most have an option.
Tax pooling is IRD approved and can be used to defer provisional tax payments to a time that suits them – without incurring late payment penalties and UOMI.
This method is cheaper than using many other traditional forms of finance – rates at Tax Management NZ (TMNZ) start from below six per cent – and does not affect existing lines of credit.
No credit check or security is required.
The full amount of finance does not need to be paid back if less tax is owed than first thought. The finance arrangement can be easily extended as well.
Contact our office if you want to discuss how to finance your provisional tax payment.