How pro­vi­sional tax im­proves cash­flow and grows your busi­ness

NZ Business - - CONTENTS -

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.


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. pro­vi­sional-tax-guide/

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