This is the best way for your clients to address outstanding 2019 income tax but an arrangement needs to be in place by 21 July 2020, otherwise use of money interest and penalties will be charged without remission. It is easy to apply for the 2019 deadline extension and put an arrangement in place on the Tax Traders’ online portal.
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On 11th June 2020, Inland Revenue used its new discretionary powers in s6I of the Tax Administration Act 1994 to allow qualifying taxpayers with a 2019 income tax liability up to 365 days after their terminal tax date to make those payments through a tax pool.
The variation (COV 20/05) sets out that to use this 2019 deadline extension, taxpayers must meet certain criteria, and critically, must have an arrangement in place with a tax pool before 21 July 2020.
To qualify for this tax pooling extension, a taxpayer will need to show either:
- That they have applied for and received the COVID-19 wage subsidy, or
- That they have experienced a significant decline in actual or predicted revenue between January and July 2020 related to COVID-19, and as a result were unable to settle their 2019 tax pooling arrangements before their normal tax pooling deadline.
To determine a significant decline in revenue, your client will need to confirm that they cannot meet their tax liability immediately by using available cash reserves, insurance proceeds or banking facilities, without impacting their ability to continue to meet their ongoing business expenditure as it falls due in the ordinary course of business.
Note: Taxpayers with a terminal date prior to 31 December 2019 are unlikely to qualify for this extension given the timing of the COVID-19 pandemic. This applies to those with October and November balance dates.
Frequently asked questions
Taxpayers and their tax agents will be able to submit an application for an extended-term arrangement via the Tax Traders portal from Tuesday 16 June.
Taxpayers who qualify under the criteria above are able to extend a current arrangement or set up a new extended arrangement. When doing so, they will be asked to complete an online application form and may be required to supply some information supporting eligibility for an extension to their current tax pooling deadline.
All taxpayers will need to provide a cashflow forecast to support their underlying application for an extension. This cashflow forecast should demonstrate the taxpayer’s ability to meet their tax liability within the extended timeframe.
If a taxpayer has not already qualified by receiving the COVID-19 wage subsidy, they will need to confirm that they cannot meet this tax liability immediately by using available cash reserves, insurance proceeds or banking facilities, without impacting their ability to continue to meet their ongoing business expenditure as it falls due.
How can I access an extended tax pooling arrangement?
Existing Buy and RIT requests can be extended online via the Tax Traders portal.
If you have a finance arrangement settling this week and you meet the criteria to extend, please contact the Tax Traders team to facilitate this extension.
What obligations does the 2019 deadline extension apply to?
The 2019 deadline extension applies to any obligation for provisional tax (other than under the AIM method) and terminal tax for the 2019 income year.
What information will I need to supply to apply for a 2019 deadline extension?
A cash flow forecast will be required to demonstrate your clients’ ability to meet their tax liability within the extended timeframe.
What level of detail is required for the cash flow forecast?
Your client must be able to demonstrate they will have enough cash available to meet their obligations under the terms of any proposed instalment plan. Key line items should include total revenue and total expenditure.
Here is an example cashflow forecast template by way of example.
What payment plans are available with the extension?
Your clients will need to pay their tax in instalments via a tax pool, spread over the shortest viable term for the taxpayer. The term cannot exceed 365 days from your client’s terminal tax date for the 2019 income year. Taxpayers will be able to choose weekly, fortnightly, or monthly instalments for these payments when applying for the extension.
When does the 365-day extension end?
The extension applies for up to a full year from a taxpayer’s terminal tax date. For example, a client with a 31 March balance date and an extension of time will have up until 7 April 2021 to settle their 2019 income tax liability via a tax pool.
My clients have not used tax pooling before, will they be able to receive the 2019 deadline extension?
Yes. Provided that your clients qualify and have an arrangement in place with a tax pool before 21 July 2020, they will be able to benefit from the deadline extension.
Can I access the deadline extension for a current tax pooling arrangement?
Yes. Existing arrangements can be extended, and if done via Tax Traders, this can be arranged through the Tax Traders online portal.
Does the extension apply to finance arrangements?
Yes. If you have a client with a finance arrangement in place and they meet the criteria to extend, please contact Tax Traders to facilitate this extension.
Do I need to submit an application for each of my clients or can this be done by group?
An individual application is required for each client to qualify
- News and updates
- Extension to tax pooling deadlines
- Frequently asked questions
- How tax pooling can help
- Understanding the IR's interest waiver
Resources for download
Peace of mind for tax finance
Access the best of IRD and Tax Traders with complimentary feeGuard.
How tax pooling can help
A one-page guide to relieving cash flow pressure with tax pooling.
- IRD - COVID-19 information page
- IRD - COVID-19 extension of time for tax pooling transfers
- CA ANZ - Coronavirus resources
- Legislation - COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act
- Beehive - COVID-19: Economic Response Package
- New Zealand Government - COVID-19 links
- New Zealand Trade & Enterprise - Coronavirus
- Ministry for Primary Industries - Coronavirus and the effects on trade
- Ministry of Health - COVID-19 Novel Coronavirus