Here is an IRD-approved option we recommend if you are set to pay terminal tax on 7 April due to underpaid provisional tax for the 2016 tax year.
Tax Management NZ (TMNZ) is a payment intermediary that allows you to reduce IRD interest costs by up to 30 percent and eliminates any late payment penalties incurred.
You can settle underpaid income tax for the current tax year (2017) or the previous one (2016) in this manner.
TMNZ pays money into its tax pool account at IRD on each provisional tax and this deposit is date-stamped. When you settle your liability through TMNZ, it arranges the provisional tax you require to be transferred from its tax pool to your IRD account. IRD treats the tax as if it was paid on the original date it was due once it processes this transfer, wiping any interest and late payment penalties owing.
TMNZ offers flexibility around how you pay. The amount of tax owed can be paid off in one lump sum or via instalments.
You also have up to 75 days past your terminal tax date to settle any 2016 income tax liabilities through TMNZ. That means your final day to pay is 16 June if you have a 7 April terminal tax date.
If you have a 7 February terminal tax date, you have until 18 April.
TMNZ is an IRD-registered tax pooling intermediary which operates under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994.
The bank account into which you make your payments is overseen by an independent trustee, which also administers TMNZ’s tax pool account. At no stage does TMNZ have access to your money.
Feel free to contact us if you wish to discuss the use of TMNZ to settle your 2016 terminal tax.