Had a cracker of a year on the farm?
That’s always good news – but it might mean you’ve underpaid your provisional tax. If that’s the case, Inland Revenue (IR) may be charging interest on that shortfall from the date of your final instalment for the 2025 income year.
The good news? There’s a way to cut that cost and even avoid late payment penalties, thanks to tax pooling through Tax Traders.
A key part of income tax legislation in New Zealand since 2003, tax pooling is an integral way of helping taxpayers to mitigate the risk and financial cost of getting their provisional tax payments wrong.
Tax Traders has tax available in its tax pool account at IR going back several years. This tax has been paid into the pool by taxpayers at different provisional tax dates, with their payments being date stamped at the time they were made.
Once these taxpayers have determined their income tax liability for the year, those who have overpaid can sell any surplus tax they don’t require to another taxpayer who has not paid enough.
Tax Traders facilitates the transaction between the seller and the buyer at much more favourable rates for both parties compared to IR’s credit and debit interest.
A dairy farmer expected a modest profit in 2025 – but ended up earning significantly more on the back of record milk prices. They underpaid provisional tax and now face a large terminal tax bill.
By buying tax through Tax Traders, they can backdate payments and avoid IR interest, enjoying significant savings.
Step one: the dairy farmer pays the tax amount (plus, the tax pool’s interest cost) to Tax Traders. This interest is up to [xx]% cheaper than IR interest.
Step two: Tax Traders transfers the date-stamped tax amount to the dairy farmer's IR account.
Step three: IR treats it as paid on time once it processes this transfer, removing IR interest and late payment penalties from the dairy farmer’s IR account.
You can also pay in instalments if you’d prefer to manage cash flow, with time until mid-June* 2026 to settle any underpaid 2025 income tax obligations.
Tax pooling is approved by IR and has been around for more than 20 years. It is well recognised across New Zealand as a smart way to manage tax and keep more in your pocket.
Have a yarn with your accountant or give Tax Traders a bell to find out how it could help your farm.
*Based on a taxpayer who has a 7 April terminal tax date for the 2025 income year.
Disclaimer: The information in this article is Tax Traders’ general view, intended to provide enough information to inform you about this topic generally as at the date of the article, rather than comprehensive information for all situations. This article should not be relied upon to make decisions. Tax Traders recommends you seek professional advice as appropriate for your circumstances. Rates are accurate at time of publication and subject to change.