Should you dive into tax pooling?

Diving into tax pooling

Okay, let’s be honest – paying provisional tax can be tricky. The amounts change from year to year, and bigger payments sometimes coincide with periods of low cashflow. Not to mention that if you underpay your provisional tax, you will likely be charged use of money interest (UOMI) by Inland Revenue (IR).

Tax pooling is designed to help solve this problem and smooth out your tax payments. Let us tell you how.

What is tax pooling?

A tax pool is a fund of money created by many taxpayers paying in their provisional tax. It’s organized by a registered intermediary, which works with both taxpayers and the Inland Revenue. We have partnered with Tax Traders and believe you will not be disappointed by the benefits they can bring.

When you join a tax pool, you pay your provisional tax into the fund. You can make a regular fixed monthly payment, for example, so it’s easier to manage your cashflow.

Your tax is then paid out of this fund on your behalf. The funds are held in an Inland Revenue account, which transfers them against the name of the members of the tax pool as instructed by the intermediary.

If you haven’t paid enough into the pool to cover your tax, the tax pool lends you the money at a cheaper rate than the IRD’s UOMI rate. If you have overpaid, the extra money is lent to other people in the tax pool and you earn interest.

How can you find out whether tax pooling is right for you?

The advantages of tax pooling are lower costs on late payments, earnings on overpayment, and generally making it easier to manage provisional tax payments.

If you’d like to know more about tax pooling, and whether it could work for you, get in touch.

We can help by answering your questions.

Surprise tax bill? Here are six possible reasons

Surprise tax bill

Did you, or someone you know, get a surprise tax bill they weren’t expecting?

Several Kiwi’s have recently been in touch after having received tax bills that took them by surprise, and they’ve been asking Inland Revenue what’s going on.

An Inland Revenue spokesperson has provided six likely reasons that more people seem to have been caught out this year:

  1. Last year, tax bills below $200 were written off as part of the pandemic support measures. This year, it’s back to the usual write-off threshold of $50.
  2. Inland Revenue is now doing tax assessments for everyone, so some people are getting bills or refunds who never have before, including some children with KiwiSaver funds or other investments.
  3. Anyone paid 27 fortnightly wage packets may have underpaid their tax – that can be fixed once IR has the correct information.
  4. Many incorrect tax codes were corrected last year, and for a few people (mainly aged over 65) the IRD made errors which they are correcting.
  5. Pension tax code changes were delayed, leading to some undertaxing which is now being rectified.
  6. Some people’s tax codes are still incorrect.

We can sort out any surprise tax bill issues

Ultimately, the Inland Revenue calculates your tax based on the information they have about you and your business. If they have the wrong information, you may be paying too much tax or too little tax.

We can look at your surprise tax bill and help you work out what’s gone wrong. We can also deal with Inland Revenue on your behalf to give them the right information and ensure you’re paying exactly what’s required and no more. We’ll work with Inland Revenue to get your refund sorted out or to come up with an affordable payment plan.

Get in touch – our tax specialists at SME Financial are here to help.