The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

Greg Millar
Published on

The tax pooling system is based on taxpayers who pay provisional tax into a ‘pool’ at Inland Revenue.

7K0A0597-403Once taxpayers know exactly what they need to pay in provisional tax (usually at the end of the year), they transfer this out of the pool to their Inland Revenue account and sell any surplus to someone else (typically for a return greater than the Inland Revenue credit interest rate they would otherwise receive).

A taxpayer faced with an underpayment can then purchase those surpluses for a fee less than the Inland Revenue use-of-money interest rate. When these surpluses are transferred from the pool to the taxpayer’s Inland Revenue account it is like a transfer from a related party, so Inland Revenue considers it a payment made on time and therefore there is nothing further to pay. Any interest or late payment penalty charges on the taxpayer’s account are usually eliminated at the same time.

Surpluses can be purchased from the pool whether you pay tax into the pool or not. Surpluses can only be sold if they’ve been deposited into the pool initially.

The acquisition of tax can be done in advance (finance) or after the provisional date (buy), and surplus tax can be sold over time (sell) or refunded within a matter of days.

Tax pooling provides taxpayers with a flexible means of managing their tax payments. Whether that be deferring a payment to a time that suits, moving payments around to achieve the even payments IRD require or achieving a better return on surplus tax payments if taxable income isn’t what was expected.

Talk with us at Alliotts in Auckland on 09 520 9200 if you are interested in understanding more about tax pooling and how it can help you manage your tax payments.

This article was provided by Tax Traders Limited. Read more about Tax Traders and the service they provide at

Topics: Inland Revenue Department Penalties tax