Keeping the doors open in a volatile season
The backdrop
A boutique hotel in Nelson was feeling the squeeze.
Winter bookings had dipped following unpredictable travel patterns and last-minute cancellations, while staffing costs surged amid industry-wide competition. Maintenance bills stacked up after a series of power outages, and interest rates remained stubbornly high.
With $30,000 in provisional tax due on 28 August, the hotel's liquidity was under pressure – right when they needed to invest in digital marketing and lock in bookings for spring and summer.
The decision
Rather than maxing out their business credit line – already carrying double-digit interest – they opted for a Tax Traders arrangement.
For an upfront interest cost of $1,740, they deferred payment for 12 months, remaining compliant with Inland Revenue (IR) while preserving flexibility to invest in their business.
Why it makes sense
- Marketing momentum sustained: Funds remained available to boost visibility and secure direct bookings ahead of the peak season.
- Stress reduction: No drawn-out approval process or collateral headaches.
- Staffing continuity: The hotel retained key hospitality staff during shoulder season, ensuring operational consistency.
- Interest savings: Tax Traders’ rates were significantly lower than their bank facility.
Quick comparison: Tax Traders vs. alternatives
|
Feature |
Tax Traders |
IR direct payment |
Bank overdraft |
|
IR compliant |
Yes – up to 22 months* to pay |
Yes |
Not designed for tax |
|
Upfront cash outflow |
No – just upfront interest cost |
Yes – full tax amount |
No |
|
Approval process |
None |
N/A |
Yes – lengthy |
|
Security needed |
No |
No |
Yes |
|
Interest cost |
Low – rates start from 5.19%, depending on tax amount and term |
UOMI of 9.89% plus late payment penalties if payment is not made on time. |
High – typically double-digit interest |
Strategic use of delay
The hotel didn’t just postpone payment – they used the breathing room to stabilise forecasted revenue, enhance their online presence, and secure group bookings ahead of high season.
Help your clients stay flexible and focused. Set up an arrangement with Tax Traders to delay their 28 August provisional tax and give them room to move.
*Based on a 31 March balance date taxpayer with extension of time.
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.