Provisional tax: A source of finance
Vincent Papesch knows the importance of having working capital available to fuel business growth.
It’s why the owner of interior floorcovering specialists Newflor uses Tax Management NZ (TMNZ) to defer the business’s upcoming provisional tax payments to a date in the future, to free up money to purchase additional stock to sell.
“It’s all about expanding our range of suppliers and having more product. That’s put a lot of pressure on us cash-wise over the last four years,” says Papesch.
“With this facility, it’s so cost-effective – the interest cost to us is negligible compared to our margins. We can add more stock to our business without the horrendous costs coming with it.
“If this service did not exist and we had to pay tax when it was due, we would’ve paid it, but that would’ve slowed our growth.”
Growth is something the Takapuna-based business has undergone since Papesch purchased it in 2012. Papesch has gradually upgraded systems, modernised the website, refreshed marketing and hired new staff. As a result, turnover has doubled compared to what it was four years ago.
Newflor is among thousands of growing businesses TMNZ has assisted since 2003.
Company chief executive Chris Cunniffe says upcoming provisional tax payments can be deferred for up to 12 months. TMNZ pays IRD on a client’s behalf, so there is no IRD interest and late payment penalties, and the client pays TMNZ at the agreed upon future date.
The upfront finance fee is much cheaper in comparison to other traditional lending facilities, and the arrangement does not affect other credit lines. No credit checks or security are required.
“Money set aside for provisional tax can often be used far more productively if it can be kept in the business.
“We allow owners to do that so they can take advantage of economic conditions or other commercial opportunities that will deliver a greater return,” says Cunniffe.