When tax pooling was first introduced in 2003, it was heralded as a game changer for businesses struggling with the unpredictability of provisional tax. Gone were the days of impossible forecasting, uncertainty for taxpayers and unrealistic interest rates on both under and over provisional tax payments. Instead, tax pooling promised a new era of flexibility and efficiency, where taxpayers could adjust and trade their tax obligations in response to their ongoing financial position.

However, promise and execution are different things and tax pooling has wrestled with an all-too-familiar litany of problems: poor interfaces, confusing rules and a steep barrier to entry. The result was unequal access to the benefits of the policy, with the savings and efficiencies offered by tax pooling primarily accessed by the companies with the biggest accounting departments.

Disrupting the system

Tax Traders was started with a simple purpose: to make the benefits of tax pooling available to all provisional taxpayers, regardless of how big or small they were. “We could see that the system was far from perfect,” says co-founder Josh Taylor.

Picture: Nicola and Josh Taylor, co-founders of Tax Traders.

“We just believed that the right technology, correctly deployed, could make the world of tax law and accounting better and fairer for everyone.”

Taylor and his team set about creating a suite of intuitive and easy-to-use tools that harnessed the power of automation and cloud computing to enable fast, transparent and efficient tax pool trading.

His company’s growth has been remarkable. From humble beginnings in 2011, Tax Traders now holds more than NZ$1 billion of tax credits under management, making it one of New Zealand’s largest tax pools. Its clients include some of the country’s most recognisable names and it recently became the exclusive tax-pooling partner for Chartered Accountants Australia and New Zealand.

The key to their success, says Taylor, is a relentless innovation mindset. “We’re always trying to solve the next problem. We spend a lot of time sitting down with financial advisers and accountants to try and understand where the pain points are in income tax and then create solutions that ease the process.”

What the company began hearing in these conversations was that accountants would use tax pooling more if it were better integrated with their regular tax software.

“We knew we couldn’t offer this sort of functionality ourselves,” says Daniel Faris, Tax Traders’ strategic partnerships manager. “But we saw the opportunity to build something useful with a similarly aligned company.”

A promising partnership

Enter Taxlab. One of New Zealand’s most forward-thinking tax compliance software providers, Taxlab shared Tax Traders’ passion for intuitive tax management tools that simplified tax processes and reduced overheads.

“We were united in our belief in the difference that technology can make,” says Taylor. “We didn’t need to wait for the future to happen. We could get together right now and build a system that advisers and accountants actually want.”

The goal was to create an exclusive, secure, two-way data flow that would allow tax pooling quotes to be automatically populated into Taxlab’s provisional and terminal tax letters.

The system takes the effort out of tax pooling; the automated tax pooling quotes allow users to directly access the Tax Traders toolkit without ever leaving their workflow in Taxlab.

“We designed it so that when provisional and terminal letters are raised in Taxlab, there are built-in options for how the taxpayer can use tax pooling to address their obligation,” explains Faris.

“We designed it so that when provisional and terminal letters are raised in Taxlab, there are built-in options for how the taxpayer can use tax pooling to address their obligation.”

For provisional tax, this could mean delaying a payment or depositing the payment directly to the Tax Traders pool so that the taxpayer has extra flexibility and liquidity in the future.

“On the terminal letter, we provide the taxpayer with an automated solution that compares what they owe with what they’ve paid and presents them with a single ‘wash-up’ solution. Behind the veil there are a series of complex calculations and transactions, but we’ve built the tool to be as simple as possible to use,” Faris says.

Yet there’s one overarching reason why this collaboration is so important to Tax Traders: accessibility. “Now we can execute these tax pool transactions for 10,000 taxpayers instantly, rather than having to do 10,000 logins, 10,000 private conversations, 10,000 plans,” says Taylor.

“Every provisional taxpayer now has the option to comply with their tax obligations in a way that suits them, not just in the way that suits the IRD. That’s something that’s never been delivered at scale before.”

Picture: Dan Faris.

As simple as possible for the people

The result is a level of flexibility that the IRD has long wanted taxpayers to have, but has never been able to offer.

“This is a case of the private sector not only delivering on a public promise but also making it radically more effective through technology and innovation,” says Taylor. “It doesn’t matter if you’re big or small, or what industry you’re in – we’ve designed this system from the ground up so it can offer something to every accounting practice.”

The whole process was guided by a simple ethos. “Tax Traders and Taxlab were willing to invest heavily in our collaboration together, because we knew it wasn’t just to benefit our own clients – it was for the benefit of all taxpayers,” he says.

“Our drive has always been to make tax pooling available to as many people as possible, as simply as possible,” adds Faris. “We want to help people with their work, with these big obligations, these arbitrary numbers and lines in the sand.

“That’s why this collaboration made so much sense to us: we recognise that by simplifying tax, you’re helping people get on with the business of being clever, creative humans doing interesting, new things.”

Find out more:

0800 TAX TRADERS (829 872)
[email protected]