NZ Manufacturer September 2013
The common question that gets asked in business is, ‘why?’ That’s a good question, but an equally valid question is, ‘why not?’ – Jeffrey Bezos
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BUSINESS NEWS
Clever solution shifts tax goal posts
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cebreaker and Douglas Pharmaceuticals – two of New Zealand’s biggest manufacturing success stories. They’re also tax savvy companies that have discovered how to retain cash for expansion and growth, while managing to pay their provisional tax on time, at rates up to 50% lower than a traditional overdraft. Cashflow can be a major issue for manufacturing businesses – especially when provisional tax must be paid on specific dates throughout the year. It’s not always possible to extend current overdrafts or go to the bank for a short term loan. Plus, it’s difficult to estimate the precise amount of provisional tax a business is required to pay. In reality, manufacturer’s earnings rarely remain the same from year to year. But if you don’t pay the correct amount, you’re hit by high interest and penalties. Faced with these problems, Icebreaker and Douglas Pharmaceuticals found their perfect solution through Pay My Tax from the tax innovators, Tax Management NZ (TMNZ). Businesses can go online to www.paymytax.co.nz or use their mobile devices to shift their tax payment dates and secure instant approval for funds through this innovative, affordable and easy to use service from TMNZ. TMNZ has helped Icebreaker, the company that pioneered the wool adventure apparel category, with its cashflow management, so its taxes are always paid on time. Head of Finance, Andy Wells says: “Given the number of countries we export to and the ongoing volatility of the New Zealand dollar, it’s hard for us to accurately predict at the start of a year what our final NZD profits will be.” Pay My Tax lets Icebreaker manage this volatility so they are never exposed to the IRD’s painful use of money interest rates. The fluctuating exchange rate and erratic export receipts have also made it hard for the huge West Auckland company Douglas Pharmaceuticals to accurately
PayMyTax helped with cashflow, ensuring Douglas Pharmaceuticals continued to grow.
predict earnings for provisional tax. Being able to access immediate cash using Pay My Tax in May was hugely beneficial, says the company’s group financial controller, Kent Durbin. “Significant outgoings haven’t always matched up with lumpy cash receipts from the export side of the business. The ability to tap into Tax Finance has been employed from time to time when cash is required
in other parts of the business.” Three days before the 7 May tax date, Durbin sought funding of several million dollars for a month and a half. “It cost us 5.4% - much lower than through a bank as an unsecured short term line. We had an immediate response, put in place with minimal fuss.” CEO of TMNZ Chris Cunniffe says Pay My Tax is particularly
useful for businesses that earn income unevenly throughout the year. “The business makes an upfront payment of the financing cost of the tax instalment. At a preselected date later in the year, when businesses have sufficient cash, they pay TMNZ for the tax instalment. IRD treats the tax payment as having been made on time. So there are no costly late payment penalties.”
PayMyTax lets Icebreaker manage their volatile cashflow to avoid the IRD’s penal rates.
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