Tax and GST reminder

Hamish Mexted Reducing Tax

A quick reminder that the next provisional tax payment, along with GST for most, is due on August 28.  We’d like to think that your accountant has already let you know how much you’ve got to pay, and that you’ve got enough cash put to one side.

If your accountant hasn’t been in touch give them a hurry up!  There’s nothing worse than being given one or two days notice to find a few thousand dollars for the tax man.  At iif we’re big on avoiding nasty surprises like this.  That’s why we advised our clients of the bad news mid way through July.

If cashflow’s a bit tight at the moment (you’re not the only one) there are options.  You could talk to your accountant about revising your estimated income for the year downwards, meaning you pay less provisional tax.  There are potential downsides with taking this option so it’s best you talk it through with your accountant.

Alternatively you could look to arrange finance with someone like Tax Management New Zealand or check out this list supplied by the IRD (scroll to the bottom).  By financing your provisional tax you pay less interest than you would pay to the IRD (around 5.5% compared to the current IRD rate of 8.4%) and can avoid any late payment penalties you may otherwise be charged.  Again, if you’re interested in financing your tax have a chat with your accountant, or give iif Chartered Accountants a call on 04 212 4977.

Finally, rather than the standard way of paying provisional tax (three payments based on what you earned last year) you could look at shifting to the ratio method of provisional tax.  The ratio method means you make a tax payment every time you pay GST, making each payment smaller and more manageable.  Also, instead of being based on what you earned last year it’s based on what you’ve earned this year.  This makes it match you current cashflow more closely, helping you budget more accurately.  This option certainly isn’t for everyone, and isn’t available to all taxpayers, so it’s best you talk to your accountant or contact us to discuss it further.