From 17 March, when the NZ government’s Stimulus Package was announced, there have been many changes to provisional tax. What are the main questions accountants are asking about these changes?
We’ve had a lot of enquiries about what the package means for tax payments, whether all UOMI will be remitted on all late payments (no, it won’t) and whether tax pooling is still a good option (absolutely, it’s better in fact). Other questions have related to timeframes and how Tax Traders manages supply to ensure we’re always holding sufficient tax inventory to cover projected demand (all well in hand).
Picture: Josh Taylor, Tax Traders' co-founder and director..
Do you think most accountants understand how to unlock the full value of Inland Revenue’s tax pooling framework?
I think most accountants have a good base understanding of the tax pooling framework and how we can help with managing their clients’ tax payments. However, Tax Traders’ online platform has evolved rapidly, providing accountants with many different options for clients and I think these are less well known.
What are some of the less well-known options that accountants should be aware of?
Well, something that is becoming more and more popular is our deposit offset option, where we can refund a client’s tax deposit funds (less an interest fee cost) to them while preserving the option to reinstate those tax payments later, if they need to.
This is very similar to the tax-loss-carry-back scheme proposed by the government, but there is no need to be in a loss position to use our deposit offset option; the amount previously deposited with us is the only limitation on what can be drawn back out.
The deposits remain in the tax pool trust account at the tax date they were made, which enables us to use those deposits as security to advance cash at competitive rates. This enables us to reinstate those payments at a future point in time when your client’s cash position improves.
How does it differ from the tax-loss-carry-back scheme?
For a start, we provide certainty around cost – and it’s a simple, straightforward application process with the vast majority of requests approved. It’s actually a great example of how tax pooling can provide a similar option to what’s currently being offered by the government. It avoids the uncertainty of estimating your losses and the risk of UOMI exposure, which is part of the tax-loss-carry-back scheme.
So, in many ways, there is already an option to access the recently announced government benefits by using New Zealand’s existing tax pooling framework?
Yes, I think tax pooling provides a very good alternative for accountants considering options such as the tax-loss-carry-back scheme but also the remission of UOMI. In many ways, it depends what accountants are after.
For example, Tax Traders is well placed to offer what the UOMI remission scheme offers but in a way that is virtually effortless. With guaranteed acceptance it’s a quick and easy process, avoiding information requirements and time-consuming phone calls.
“Tax Traders is well placed to offer what the UOMI remission scheme offers but in a way that is virtually effortless.”
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But unlike the government’s scheme, there is a cost to tax pooling?
Yes, there is a small cost involved, but many accountants see the value in using Tax Traders in preference to alternative options because of the value of time saved and the certainty and flexibility we can provide their clients.
In what other ways has Tax Traders responded to the COVID-19 crisis?
Keeping cash in a client’s business is crucial in uncertain times like these and this is our bread and butter, so we are well positioned to help. We really wanted to provide our clients with two things: certainty and tangible support.
Firstly, we knew there would be more queries coming our way, so when the COVID-19 crisis hit, we immediately set up to be available 24/7. Clients could have their query sorted at the time they were thinking about it, whether that was 7am on a Saturday or late into their Tuesday evening.
We also wanted to provide certainty for taxpayers, so very early on we decided to make delaying tax payments frictionless which included providing our ‘feeGuard’ assurance product for free. This allows the taxpayer to recover the portion of their up-front interest cost on any tax they don’t end up using.
This means a business can apply to Inland Revenue for remission of UOMI as well as setting up a delayed tax payment arrangement with Tax Traders, and we guarantee a full refund if Inland Revenue later waives their late payment interest.
What else is Tax Traders doing to ease the burden for accountants currently?
We are mildly obsessed with doing everything we can to save time for busy accountants. We think this is more necessary than ever right now. We want to remove pain points for accountants and increase their productivity. By using the Tax Traders platform, accountants can automatically generate their own provisional tax notices, which embed alternative provisional tax payment/deferral options into the notice, co-branded with their logo and ready for distribution. This is proving very popular as a tool in the accountant’s toolkit.
“We are mildly obsessed with doing everything we can to save time for busy accountants. We think this is more necessary than ever right now.”
What is tax pooling?
The Inland Revenue’s tax pooling framework gives taxpayers control over when and how they pay provisional tax – and saves them money.
Instead of paying directly to Inland Revenue (IR), the taxpayer pays into a tax pool as cash becomes available through the year.
If they have underpaid at the end of the tax year they can buy tax to settle their liabilities, avoiding IRD late payment penalties and use-of-money interest.
If they have overpaid, they can earn premium interest by selling their excess. Tax Traders is an IR-approved intermediary and all funds are securely held by the Public Trust.
Picture: Michael Stoddart and Anu Shobhana Sasikumar from the Tax Traders team.
Find out more:
Call 0800 TAX TRADERS (829 872) or email [email protected]