How tax pooling can help you meet your provisional tax payments
11 September 2024
Was your provisional tax amount more than you expected this year? Provisional tax is calculated by your previous year’s residual income tax plus 5%. But the provisional tax you’ve paid in the past may not reflect how your business has performed over the current financial year. Plus, if you underpay your tax, this can lead to use of money interest (UOMI) being charged by Inland Revenue (IRD), and UOMI has increased in recent years.
It can also be challenging for any business to keep a lump sum of cash aside to pay provisional tax on it’s due date, especially if you have cash flow issues or need money on hand.
If paying provisional tax is challenging for you, tax pooling could be the perfect solution. The way it works is that IRD-approved intermediaries collect payments from many taxpayers and put them into a tax pool account with IRD. They then allocate these payments to the taxpayers’ accounts as needed. Once the pool has made the payment to IRD, it is considered to be ‘tax paid’. If you haven’t paid enough tax to meet your provisional tax liability, you can purchase tax payments made by the pool for lower interest rates than those charged by IRD. You can set it up so you can make payments to the pool to help you with provisional tax in future years. There are pros and cons to this and the pros include:
- Flexibility around when you pay provisional tax; you can overpay when you have a bit more money and have some breathing room when things get tight.
- Avoiding penalty charges and use of money interest (UOMI) charges for late payments; the pool will always make time-stamped payments for you.
- If you haven’t paid enough tax to meet your provisional tax liability, tax pools typically charge lower interest rates for purchasing tax payments than those charged by IRD.
- If you’re short on cash, you can dip into your tax pool payments as an emergency line of credit, as long as you top up the money later.
- If you do take money out of the pool, you’ll pay a lower rate of interest than banks charge.
We work closely with Tax Traders so, if you’re finding keeping money aside for provisional tax payments difficult, talk to us today to see if tax pooling is the right fit for you.
It's that time again and Moving Day is upon. Moving Day' is a big day in the farming industry. To help you with a smooth transition here are some tips: Early preparation Make sure sharemilker or contract milker contracts are signed. Plan a farm inspection with relevant parties (farm owner, incoming and outgoing sharemilkers, farm manager, advisor). Recruit and finalise employment agreements for new farm staff. Communicate plans and dates with everyone involved. Contact your insurer and utility providers. Farm owner responsibilities Make sure employees leave the houses clean and tidy. Carry out house inspections for maintenance. Comply with healthy home standards. Confirm departure and arrival times with tenants. Consider drug testing, if needed. Animal movements and biosecurity Plan animal movements carefully. Clean and disinfect farm equipment and machinery. Minimise the risk of introducing exotic pests. About 5,000 farmers do this every year. Talking clearly and planning well makes this important farming tradition go smoothly.
Selling your business is a huge milestone—one that marks the culmination of years of hard work, dedication, and vision. But once the deal is done and the dust settles, you may find yourself wondering, “What’s next?” Exiting your business opens up a world of possibilities. Here are five potential pathways to consider as you embark on this new chapter of your life. 1. Enjoy Retirement For many, selling a business is the gateway to retirement. After years of being immersed in the day-to-day demands of running a company, retirement offers the opportunity to slow down and enjoy life at your own pace. Whether it’s traveling, spending time with family, or taking up new hobbies, retirement allows you to focus on the things that bring you joy. Planning ahead—both financially and emotionally—will ensure you make the most of this well-earned time. 2. Invest in Other Businesses Selling your business doesn’t mean stepping away from the business world entirely. Many people choose to invest in other businesses, whether it’s through buying equity, becoming a silent partner, or supporting start-ups. Your years of experience give you a unique perspective, and investing allows you to stay connected to the business community while diversifying your income streams. 3. Start a New Venture Once an entrepreneur, always an entrepreneur! If you have a new idea or are passionate about exploring a different industry, selling your business can provide the resources and freedom to start fresh. Whether it’s launching a tech start-up, opening a café, or pursuing an entirely new market, starting a new venture keeps your entrepreneurial spirit alive. 4. Become a Non-Executive Director Another pathway is to leverage your expertise and become a non-executive director. Many businesses value the insight and guidance of experienced business people. As a non-executive director, you can provide strategic advice, mentor leadership teams, and help shape the future of other companies—all without the full-time commitment of running a business. 5. Pursue Philanthropy For some, selling a business is an opportunity to give back. You might choose to support causes you care about through charitable donations, creating a foundation, or volunteering your time. Philanthropy not only helps make a difference in your community or the wider world but can also provide a deep sense of fulfilment and purpose in your post-business life. Charting Your New Path Exiting your business is both an ending and a beginning. It’s a chance to reflect on everything you’ve achieved and to embrace new opportunities that align with your goals and passions. Whether you’re ready to relax and retire, dive into new ventures, or make a positive impact through philanthropy, the choice is yours. Whatever path you choose, careful planning will help ensure your next chapter is as rewarding and successful as the one you’ve just completed. If you’d like support in exploring your options or preparing for life after your business, don’t hesitate to reach out us for guidance.
Cybercriminals are constantly finding new ways to trick businesses, and their scams are harder than ever to spot. Small businesses are especially at risk, often seen as easy targets due to limited resources or weaker security. But with the right precautions, you can protect your business and prove the scammers wrong. Be Aware of New Threats Staying informed is your best defence. Here are some of the latest cyber threats: AI-Powered Scams : Scammers now use artificial intelligence to create convincing phishing emails and fake websites that are difficult to distinguish from the real thing. Impersonation Attacks : Posing as banks, government agencies, or suppliers, attackers aim to trick you into sharing sensitive information. Deepfake Technology : Fake audio and video messages that mimic trusted sources are becoming more sophisticated and harder to detect. Train Your Team Educating your team is crucial. Teach them to: Spot warning signs, like urgent requests to act quickly. Double-check email addresses and URLs before clicking on links. Be cautious with unusual requests, even if they seem legitimate. Regular training sessions and phishing simulations can help your staff stay alert and recognise scams before they cause harm. Protect Your Business Basic but effective security measures can go a long way. For example: Enable two-factor authentication to secure your accounts. Keep your software and systems up to date. Use resources like the Business Online Security Series for practical cybersecurity tips. It's also wise to consult with your IT provider to evaluate your business’s vulnerabilities and develop a cybersecurity training plan for your team. Taking action now can save your business from potential threats while safeguarding your reputation. Stay informed, train your team, and strengthen your defences!
To discuss all your account matters please call us on 09 438 1001
