With the first provisional tax payment for the 2016 financial year       (1 April 15 to 31 March 16) due 28 August 2015 and also coinciding with GST we thought we would outline a couple of options for clients that might be struggling to pay the amounts in full.

The easiest option is to set up an instalment arrangement with the Inland Revenue to spread the payments out.  We would generally recommend that the length of the arrangement is limited to the length of the period between payments (IE: four months between provisional tax payments and 2 months between GST payments).  There is of course a cost!  The cost is a 1% late payment fee of the unpaid amount (part paying would minimise the fee) and interest that is calculated at 8.89% per annum.  The arrangement must be set up before the due date of the tax payment.

The other option we recommend to clients, usually for larger amounts, is to enter into a finance arrangement with the likes of Tax Management NZ (www.tmnz.co.nz).  They have a transaction fee and interest rates starting at 5.59%, depending on the amount and length of the arrangement.

We would recommend paying as much as possible of the tax payment due, but if you are short and need some short-term assistance, then one of the two above options would be worth considering.

If you do not set up an arrangement before the due date or fail to pay the amount in full within 7 days of the due date, then you were incur a 5% late payment penalty, 2% late payment penalty per month thereafter and interest at 8.89% per annum. 

The Inland Revenue is increasingly aggressive around chasing up taxation arrears, so cause yourself unnecessary stress by ignore tax payments.  If you are short, give us a call on 04-970-1182 and we can talk through a workable solution to keep the Inland Revenue off your back.

Written by Ben Duflou