Understanding Tax Pooling

Tax pooling is a service that lets your company make an income tax payment through an approved tax pooling provider, instead of paying the IRD directly.

If you’ve missed a payment or underpaid, the provider can match you with another taxpayer who paid too much, too early. They effectively swap part of their payment to cover yours.

Because the other taxpayer’s payment was made on time, your payment is treated as if it was paid on the original due date. This will remove IRD interest and penalties.

Tax pooling also works the other way: if you’ve overpaid your tax, you can sell the surplus through the pool and earn interest from another taxpayer who needs it.

It’s a flexible way to tidy up tax payments, smooth cashflow, and avoid unnecessary costs – without having to renegotiate directly with the IRD.

Using tax pooling isn’t free, but the costs are usually much lower than paying IRD interest and penalties.

If you’re buying tax to cover a shortfall:

• You’ll pay interest to the tax pooling provider, typically well below the IRD’s interest rate.
• There may also be a small arrangement fee.

If you’re selling surplus tax:

• The provider will pay you interest, at a rate they set.
• They may take a small margin before passing the interest on.

The exact cost depends on the amount of tax, how far back the payment needs to be backdated, and which provider you use.

Tax pooling can be a smart way to save money and reduce risk compared to paying the IRD directly.

Tax pooling in New Zealand is offered by Inland Revenue-approved intermediaries. The main providers are:

• Tax Management NZ (TMNZ)
• Tax Traders
• Tax Pooling Solutions

All providers operate under the IRD’s tax-pooling framework. Funds are held on trust by an independent trustee (such as the Public Trust) until they’re transferred to Inland Revenue.

This structure means your money remains protected and traceable at all times, making tax pooling a safe, regulated way to manage your provisional tax.