What is tax pooling?

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Tax pooling gives you a better way to pay provisional tax. Instead of paying Inland Revenue directly, you make your deposits with a registered provider like Tax Traders. Each deposit is date-stamped and held in a tax pooling account. Once your actual tax is known, it can be transferred to your Inland Revenue account and treated as paid on the date you made the deposit, within the time limits set by law. 

How tax pooling works in three steps

You deposit your tax with a provider. Instead of paying Inland Revenue directly, you make your deposits with a registered tax pooling provider such as Tax Traders.

Your deposit is date-stamped. Each deposit is recorded with the date Inland Revenue receives it, and held on trust in the provider's tax pooling account at Inland Revenue.

Your tax is matched once it's known. When your final tax position is known, funds are transferred from the pool to your Inland Revenue account. The transfer is treated as a payment on the date of your deposit, as long as it's requested within the legal time limits (generally 75 days after your terminal tax date).

Tax Traders team in a meeting about how tax pooling works
How does tax pooling work? Learn more

Paying Inland Revenue directly or using tax pooling

Instead of paying provisional tax straight to Inland Revenue, you can make deposits with a registered commercial tax pooling provider such as Tax Traders. The main benefit is flexibility: tax pooling gives you options, such as backdating payments and buying or selling tax, that aren't available when you pay Inland Revenue directly. 
 

Paying Inland Revenue directly

Using tax pooling

Who you pay

 Inland Revenue 

A registered tax pooling provider, which holds deposits in a pooling account at Inland Revenue 

Payment date 

The date you pay is the date it counts

Deposits are date-stamped and, when transferred within the time limits, count from the deposit date

If your forecast is wrong 

Underpayments and overpayments attract use of money interest (UOMI)

You can cover underpaid tax by buying tax already in the pool. Surplus tax can be sold or refunded once your actual position is known

Flexibility

Payments follow Inland Revenue's due dates

Tax Traders services can include paying later, paying in instalments or settling underpaid tax.

How tax pooling flexibility works in practice

More ways to use your tax deposits


Depositing into a registered tax pool gives you options. You can sell surplus tax, subject to demand, or request a refund of unused pool funds before you file a return.

Align tax with cash flow


Tax Traders can help line your tax payments up with your cash flow. You might pay provisional tax later or in instalments, or buy tax to settle underpaid tax. These are commercial services with fees and interest, and depending on your circumstances, the cost can be lower than Inland Revenue's use of money interest.

Your deposit date is what counts


Once your final tax position is known, deposits can be transferred from the pool to your Inland Revenue account. The transfer is treated as a payment on the date of your deposit, within the time limits set by law.

Frequently asked questions

The "pool" is the tax pooling account that a registered provider holds on trust at Inland Revenue. Deposits are date-stamped. Once a taxpayer's final tax position is known, deposits can be transferred to cover tax owing, and surplus tax can be sold (subject to demand) or refunded.

Instead of paying provisional tax straight to Inland Revenue, you deposit it with a registered provider. Once your actual tax is known, the deposit can be transferred to your Inland Revenue account and treated as paid on the date Inland Revenue received it, within the legal time limits.

Yes. Tax pooling is provided for in New Zealand tax legislation. Tax Traders holds a tax pooling account approved by the Commissioner of Inland Revenue, and Inland Revenue lists us as a registered tax pooling intermediary.

Provisional tax asks taxpayers to forecast their income and tax before the year ends, which is hard to do well. When a forecast is off, a taxpayer can underpay or overpay. Use of money interest (UOMI) compensates Inland Revenue or the taxpayer for the use of those funds, but it doesn't make forecasting easier. Tax pooling was introduced in 2003 to give taxpayers a practical way to manage that uncertainty. It lets you correct overpayments and underpayments once the actual position is known, while the right amount of tax is still paid to Inland Revenue.

Tax pooling is governed by the Income Tax Act 2007 and the Tax Administration Act 1994. The primary references are sections RP 17 to RP 21 of the Income Tax Act 2007 and sections 36BB, 120OD, 120OE and 124S to 124X of the Tax Administration Act 1994. Related provisions on imputation credits are in subparts OB and OP of the Income Tax Act 2007.