TAX MANAGEMENT NZ

For many in construction, 15 January is when GST and provisional tax payments are due. While the timing of these payments can be problematic, there are a few simple things you can do between now and then to ensure you are ready to pay Inland Revenue what you owe

Two important tax payments – GST and the second instalment of provisional tax for the 2018 tax year – are due to Inland Revenue (IRD) on 15 January.

Coming just after Christmas and in the early New Year, the timing of these is not necessarily ideal as things are quiet on the work-front and cashflow can be tight. Getting hold of your accountant may also be difficult.

The IRD, however, will not take that into consideration if you don’t meet your tax obligations on time. In fact, it will come down hard, subjecting you to a high interest rate of 8.22% and late payment penalties. This can hurt.

The last thing anyone wants is to have the taxman breathing down their neck, especially as the department has become more vigilant after it uncovered high levels of noncompliance among tradespeople concealing part, or in some cases all, of their income.

Builders in Auckland, Christchurch, Queenstown and Wellington may be familiar with this crackdown, as these regions have been specifically targeted.

Below are some basic tips that will help you get tax-ready, as well as an option to pay provisional tax how and when it suits you.

Know how you are placed financially

Start by reviewing your books to make sure your records are accurate and up to date. This will provide an indication of your overall cashflow position.

Do a budget

Figure out what your outgoings are and ensure you have a plan to pay for these while you are off work. This is important, especially if it is going to be a few weeks before you start earning an income again.

Complete jobs early

The faster jobs are completed, the faster you can be paid. If possible, prioritise work that can be finished quickly, so you can bill clients and have money in the bank before taking your holiday.

Chase outstanding payments

Cast your eyes over your debtors’ ledger and see who owes you money. Find out if they can pay early. Maybe offer a slight discount to sweeten the deal, as this could make a significant difference to your bank balance.

See if you can pay other creditors later

This is not always ideal, but worth considering if meeting tax obligations is going to be difficult. The IRD is not so forgiving, but suppliers with whom you have a good working relationship may offer you leeway if you explain your situation.

Use a tax pooling intermediary for your provisional tax

If it comes down to a choice of having to pay GST or provisional tax on 15 January, prioritise paying GST to the IRD and use an IRD-approved tax pooling intermediary to sort the other.

Intermediaries give you the option of deferring the full amount of provisional tax due by letting you chip away at what you owe in instalments. The interest they charge is much cheaper than the IRD’s and they also eliminate late payment penalties.

Seek advice

If you have any concerns, chat with your accountant. After all, you pay them for their expertise. Any good adviser should be working alongside you to come up with a tax payment and cash flow management strategy, as well as recommending options that suit your business.

Paying tax is never ideal, especially if it falls due when you are on holiday or are experiencing cash flow constraints. However, like anything, the key is to be organised and have a plan. Spend a bit of time doing that and you will be ready to pay the IRD what you owe on 15 January.

Chris Cunniff e is the chief executive of New Zealand’s largest tax pooling intermediary, Tax Management NZ. He is the former head of the BNZ and Air New Zealand tax teams. www.tmnz.co.nz.