Short on cash to pay upcoming provisional tax? Delay a payment by up to 22 months through financing.
How to delay an upcoming payment
If you know in advance of a provisional tax date that your client is unable to make a deposit or full payment of the tax amount due, or they wish to retain cash in their business, you can set up a finance arrangement for your client through Tax Traders to pay the provisional tax. When something is put in place in advance, Tax Traders is able to offer your client a significantly lower interest rate, compared with arranging something later, so it is well worth talking to us if your client is looking for some flexibility.
This option is particularly helpful in industries where income is seasonal or for businesses that are growing and therefore need to reinvest cash, allowing cashflow to be managed more effectively throughout the income year.
How does it work?
Your client simply pays the interest up front, and then pays their provisional tax at a maturity date they select up to 22 months later. The provisional tax is held for your client in a Public Trust account at Inland Revenue and is transferred to their Inland Revenue account at maturity, once the provisional tax is paid to Tax Traders.
If your client no longer needs all the tax at the maturity date, there is no break fee, however they will not be eligible for a refund of the interest already paid to us. Our online tools make it easy to setup an arrangement and make adjustments as you go, where necessary.
Benefits
- Eliminate late payment penalties and minimise debit use of money interest charges.
- Retain working capital in your client’s business.
- Less expensive than entering an arrangement after the fact.
- Easy to set up – no security or financial disclosures are required.
- Guaranteed availability of tax credits.
- At maturity, your client only pays the amount that they need, even if this is less than the principal amount they originally financed.
- Pay the amount at maturity or by instalment.
- No establishment fees or charges.
- Does your client need more time than initially arranged? Extend the maturity date as required, up to 75 days after their terminal tax date. We track this for your client.
Criteria
- All finance arrangements must be completed and the funds transferred to Inland Revenue within 75 days of your client’s terminal tax date.
- Income tax is the only tax type that can be delayed in this manner.
Do it all online in just a few minutes
On your client dashboard, select Manage Tax > Quick Links > Delay an Upcoming Payment – and follow the prompts.
FAQs
How much does tax finance cost?
Because tax finance is effectively purchasing tax in advance, we think this should be done for your client at a discount and not a premium. We aim to ensure tax financing with us is always cheaper than purchasing tax. Please use the Finance Calculator on your Tax Traders account or select ‘interest upfront’ in the payment options to calculate the specific rate.
Can my client put a tax finance arrangement in place if the provisional tax date has passed?
Yes. This can be done online through your Tax Traders account.
How long does it take Tax Traders to confirm a request for tax finance?
Requests for tax finance are confirmed immediately.
Does Tax Traders have any minimum limits on how much tax can be financed or a minimum length of time?
No, we do not have any minimum limits on amount or term.
How long can my client defer paying their tax with tax finance?
At the end of the finance period, the maturity date for any tax payments can be extended for a further period if required, provided that the maturity date selected is not more than 75 days after the terminal tax date for the income year your client is financing. In practice, this means some payments can be deferred for as long as 22 months. An additional finance fee will be raised to cover the extension required.
Does my client have to pay for the entire amount financed at the end of the finance period?
No. With tax finance, your client is securing a guaranteed entitlement to tax but without any obligation to ultimately take it up. If your client realises by the end of the finance period that they no longer need that much tax, they only have to pay for what they need.
Can my client finance non-income tax types?
No. Tax financing is only for income tax.
Can my client pay their tax finance principal off in instalments?
Yes, your client can pay the principal off in instalments that suit them prior to the maturity date. This can be selected at the payment options stage when placing an order.
My taxpayer has a finance arrangement but the funds aren't showing on their IR account. When will the funds show up?
If your client has set up a finance arrangement with an interest upfront payment option, their core tax payment will be delayed to a selected maturity date in the future within the allowable tax pooling window (75 days after their terminal date). The interest payment made to Tax Traders enables funds to be reserved in the pool for their future use.
IRD will be notified the client has an arrangement in place, and will flag the taxpayers account as being a tax pooling user, but no funds will be transferred to their IRD account until the core tax is settled at the maturity date selected.
I have a finance arrangement in place for my taxpayer but we have finalised their return and this is no longer required. Can I cancel this myself on the portal?
No. Once a finance fee is paid and an arrangement is put in place this can no longer be cancelled on the portal. You can contact team@taxtraders.co.nz to arrange the expiry of the arrangement.