Have you got high tax bills? Have you got fluctuating profits? Are you paying too much interest on your taxes?
Talk to us about using Tax Pooling to minimise your interest costs and maximise your interest returns.
When you are in the provisional tax regime, Inland Revenue require you to pay tax on what you estimate your future year profits to be. Getting the estimation correct can be difficult, costly, and sometimes impossible. If you under pay your tax, Inland Revenue will charge you interest at a rate much higher than the standard bank rates. If you overpay your tax, Inland Revenue will pay you interest at a rate much lower than the standard bank rates. Unless your tax estimation is 100% correct, you may be penalised whichever side of the equation you fall on.
Inland Revenue recognises the provisional tax regime can be unfair and allowed the establishment of Tax Pooling as a way to lessen the burden for tax payers.
Tax Pooling is where you pay your provisional tax to a "pool" as opposed to Inland Revenue, and the tax is only transferred to Inland Revenue once your actual results are known. This enables tax payers to buy and sell under or over paid provisional tax with each other. The interest rates charged and paid by the tax pool are much better than Inland Revenue's rates and therefore costs you less.
Tax Pooling intermediaries are recognised by Inland Revenue and your tax payments are held by Public Trust.
This method of paying provisional tax is suited to taxpayers with Residual Income Tax obligations of $60,000.00 or more, and those entities with fluctuating profits.
Please phone our office if you would like to talk through whether Tax Pooling could be right for you. Jessie Alison is our Tax Pooling expert and her contact details are below.