2019 terminal tax payments are due on 7 April 2020. All our clients will now have received notification via email or phone if you have a payment due.
If you are currently experiencing cash flow difficulties to meet these payment (related or unrelated to Coronavirus) please let us know as soon as possible. There are options available as outlined below.
2019 Terminal Tax Payments due 7 April 2020 – Options Available
Payment arrangement with IRD
This allows you to pay off the tax over time in regular instalments up to 24 months.
If the cash flow difficulties are due to COVID-19(and meets the eligibility criteria) then no IRD penalties and interest will be applicable as outlined here.
If unrelated to COVID-19, a payment arrangement with IRD will still save IRD late payment penalties. These can be significant, and we recommend taking action to notify IRD and request a payment arrangement early.
Tax payments with Tax Pooling
This option is suitable if you are expecting cash to make the tax payments but won’t receive this until after 7 April 2020. Using tax pooling, results in no IRD late payment penalties and reduced IRD interest costs.
Tax pooling allows you to make tax payments up to 17th June 2020. Payments after this date must be made directly to IRD (and would incur late payment penalties and interest if paid after 7 April 2020).
Financial Hardship Application
If you are currently experiencing financial hardship, please notify us as soon as possible. This application requires full financial position disclosure to IRD and may result in IRD writing off any tax liability.
Financial hardship generally means that you are living week to week and have no significant assets (that could be sold to pay the tax debt). IRD also expect you to attempt to raise a loan to pay the tax before they would consider writing off the debt.
2020 Provisional Tax Payments due 7 May 2020
2020 Provisional tax is due one month after terminal tax payments on 7 May 2020. This is also when GST payments are due for the period ending 31 March 2020. 2020 provisional tax reminders will be emailed in early April.
The recently announced provisional tax chances due to COVID-19 will take effect from the 2021 financial year. More information is outlined here.
Provisional Tax payments with Tax Pooling
There is potential to use tax pooling to delay paying the third instalment of 2020 provisional tax without incurring IRD penalties. Using tax pooling would still result in paying some interest; generally, 5.25% which is lower than most bank overdraft rates.
Using tax pooling may provide cashflow certainty knowing that the tax payment isn’t due until up to 12 months later.
We have previously published more information about tax pooling in this article.
Contact Tim Doyle or Jane Evans today for a no obligation phone call or meeting on 07 823 4980 or email us. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.