How provisional tax improves cashflow and grows your business
C ashflow management and sourcing finance for business growth can weigh heavily on a business owner’s mind. However, Tax Management NZ (TMNZ) is an IRD-approved tax payment provider that offers solutions through provisional tax.
Provisional tax payments are an expense that can test cashflow reserves. After all, IRD expects these obligations to be settled on the dates it sets. It will charge interest of 8.22 percent and late payment penalties if you don’t pay.
Clients tell us the 15 January provisional tax payment is problematic. Moreover, findings from Xero’s Small Business Insights showed that January 2018 was the weakest month for cashflow, with only 38.6 percent of respondents cashflow positive.
One option that can help is Flexitax ® . You can use Flexitax to manage cashflow if you: • Find it difficult to put money aside for provisional tax (or an unforeseen circumstance requires you to spend said money). • Want to mitigate the financial consequences if you cannot pay on the dates prescribed by IRD. • Are a highly seasonal business and want to align provisional tax payments to when you earn your income. • Want to avoid the hassle of entering an IRD payment plan or the high cost of borrowing to pay tax.
Flexitax lets you pay your provisional tax in instalments, reducing IRD interest costs by up to 30 percent and eliminating late payment penalties.
Unlike an IRD payment plan – which requires you to provide certain financial information and details about how and when you will pay the tax due – the arrangement will not be affected if you miss a payment. That’s because there are no set amounts or payment dates. You pay what you can, when you can, depending on your cashflow. TMNZ’s interest is recalculated on the core tax remaining at the end of each month.
FINANCE AND WORKING CAPITAL
Whether it’s buying more stock, a new truck or reinvesting in your business, paying for these things costs money. Many small business owners struggle to source funds.
Granted, there are several choices available for accessing the working capital required – such as bank loan, overdraft, credit card and an unsecured loan.
But again, it’s not that simple. There can be hoops to jump through during the approval process and you may require an asset as collateral. If there is no approval process, then you may face double-digit interest.
However, there’s another option at your disposal: Tax Finance.
You will find this useful if you: • Are looking for a cheap source of funding
that doesn’t affect other lines of credit. • Want to keep headroom in your existing
lending facilities. • Don’t wish to go through the rigmarole of
the normal lending process. • Want the certainty of a fixed interest cost. • Feel there is more to gain financially from keeping money in your business instead of paying tax. Tax Finance lets you defer the full payment of provisional tax to a future date without incurring IRD late payment penalties.
You choose when you want to pay, and pay a fixed, upfront finance fee to TMNZ to put the arrangement in place.
The finance fee, which is based on the amount of tax due and how long you’re deferring your payment, is cheaper than other forms of traditional finance such as a business overdraft or unsecured loan. For example, it only costs $215 to defer a $10,000 provisional tax payment for six months. Approval’s guaranteed, and no security required.
DownloadTMNZ’s freeprovisional tax guide for all you needto know about managingyourtax obligations and making informed decisions to suit your businessneeds. www.tmnz.co.nz/ provisional-tax-guide/