Get tax sorted before Christmas – or feel IRD’s wrath

You may feel like Inland Revenue (IRD) has got it in for builders. Not only are they monitoring your tax affairs like a hawk as part of their increased investigations focus on the construction sector (you may have seen the ‘tax crime’ ads), but they could also be about to ruin your well-deserved Christmas/summer break.

How? Two important tax payments – provisional tax and GST – are due on January 15.

Talk about awful timing. They are to be paid when business activity usually goes into hibernation and cashflow can be tight. Most accountants are also enjoying respite from preparing and filing returns.

But IRD does not recognise that. No. They want you to pay your tax obligations on January 15 – and you will feel their wrath (steep interest and late payment penalties) if you do not.

With non-compliant tradies feeling taxman’s wrath on the back of the increased investigations activity, it really pays to keep in IRD’s good graces. Getting tax-ready often involves doing a few basics before you down tools for the year. These small things can make a big difference (well done if you are already doing them).

There is also an option which lets you pay provisional tax when it suits you, not in the middle of January.

Firstly, it’s important you know your current cashflow situation. This can be ascertained by reviewing your books and making sure all financial records are up to date.

Doing a quick budget to determine what expenses you need to cover while off work will also help you identify any issues you may encounter. There are things you can do right away to improve your bank balance.

Prioritise finishing jobs that can be completed quickly. The faster you finish something, the faster you can invoice clients and receive payment.

Speaking of which, see if anyone who owes you money can pay early (consider offering them a discount to encourage this). Don’t forget to chase those who have not paid for work you completed a while ago. You may also wish to talk with your suppliers to see if you can re-negotiate a new settlement date. If, having done all that, you will still have difficulty paying tax on time, consider entering a payment arrangement with an IRD-approved tax pooling intermediary. Intermediaries let you choose how and when you pay provisional tax, without incurring IRD’s wrath.

The key to paying tax is not leaving things until the last minute.

As you prepare to get everything related to your January 15 payments sorted before Christmas, be sure to contact your accountant. They can work with you to come up with a cashflow management and tax payment strategy.

TMNZ is a NZCB National Partner and New Zealand’s leading tax pooling pioneer. Get in touch with TMNZ on 0800 829 888 or support@tmnz.co.nz if you have any questions about tax pooling.