Help your clients keep their cash and pay their tax

Tax pooling is an innovative concept permitting businesses to use tax intermediaries to effectively sell overpayments of provisional tax to taxpayers who have underpaid. There are essentially three elements to tax pooling:

• Purchase overpayments of tax to pay underpayments of tax where;
  • Underpayments can apply to provisional tax, and;
  • Where Inland Revenue conducts an audit, the tax can also be applied to GST and FBT
• Selling tax refunds
• Financing tax

Today's economic climate has seen an upsurge in businesses looking for ways to better manage their cash flow. Corporates and SME businesses alike, have taken to using the Tax Management NZ TaxFINANCE service as a feasible, easily accessible line-of-credit.

Financing Tax - How it Works

The process itself is simple - a business will pay a tax finance fee (from as low as 6%) now and delay their provisional tax payment for up to 12 months. A Trust will hold the tax due by that business in the Trust tax pool at Inland Revenue where the Trust will take security over the tax payment itself. This keeps interest rates low and avoids the need for that business to provide any additional security.

Businesses benefit because they are provided with another line of credit requiring no application fees, forms or additional charges and where pre-approval is guaranteed. Where that business doesn't require the full use of funds initially identified, they only have to take up what they need.

Let's look at an example of how easy this process is:

• Business X has $35,000 provisional tax instalment due on August 28, 2009
• Business X plans to pay the $35,000, 10 months from today
• Utilising the TaxFINANCE calculator, Business X will pay a tax finance fee of $1,840

This allows Business X to use $33,160 in their business for the next ten months without penalty.

Accountants across New Zealand have access to the TaxFINANCE calculator and within seconds can inform their clients how much it will cost them to finance tax for a set period.

Partnership

Tax Management New Zealand is continually looking at ways they can assist New Zealand businesses to make tax payments easier. Our partnership with Net Prophet corroborates our desire to support accountants to help clients manage their tax to their benefit.

We are watching this space regarding new legislation likely to be introduced by Inland Revenue in September, and will provide comment on this at that time.

In the meantime, expect to hear more from us through Net Prophet.

For more information visit Tax Management New Zealand, 0800 829 888, www.tmnz.co.nz

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