If you client has deposits in the tax pool, these can potentially be utilised for a non-income tax liability if the below criteria is met:
- Tax is sent at deposit date
- Evidence of liability at IRD is provided
- Funds are sent to a future income period
- Funds are sent to the taxpayer where deposits sit, to preserve their deposit status
Load a transfer
You cannot directly transfer them to the other tax type. This is because tax pooling cannot be used for initial assessments of other tax types outside of provisional or terminal income tax.
To transfer these funds, you need to:
- Transfer the deposit funds from the tax pool to a future income period
- Transfer funds at their deposit date
- Provide evidence of the liability at IRD
Note: We will require supporting evidence of the other tax liability before the transfer can proceed. Please email a screenshot of the MyIR account with the liability to team@taxtraders.co.nz
Does this type of transfer earn interest?
Due to the limitations on the use of purchased funds you cannot swap funds forwards and then transfer these funds to a future income period as they will not be accepted by IRD.
If the due date for the other tax liability is yet to arrive and you have at least two Fridays between the date you are initiating a transaction and needing to transfer funds, you can:
- Set up a sell of deposit funds with the instruction "Redeposit in Pool". This will enable the original deposit funds to be sold on the next Friday following the sell being submitted, and the proceeds including the net interest earned will be deposited back in to the pool.
- Following this being completed you can then use the new deposit funds to transfer to a future income period to meet the other tax liability. This is only beneficial where the redeposited funds will be available prior to the other tax liability being due.
Can I use purchased funds?
The only way purchased funds can be used to assist with meeting another tax liability is to sell the funds.
We can make a direct cash payment of the sale proceeds to IR on the selected processing day (normally the Friday following the transaction being submitted, but will otherwise be the sale date selected on the sell estimate) and have this directed to the tax type and period your client requires.
Note: Sale proceeds are dated as at the transaction date selected. Therefore if the due date of your other tax liability has passed already, the proceeds sent across will not mitigate all interest and penalties which IR have applied to the account.
If you have a client in this situation please ensure you provide us with your instructions prior to the due date of the other tax. This will help minimise any additional costs the client may incur.