Inland Revenue have announced their new Use of Money Interest (UoMI) charges effective from Friday 8 May, 2020.
For clients who have underpaid tax, such as provisional tax, the UoMI rate has decreased from 8.35% to 7.00%.
Overpayments of tax will decrease from 0.81% to zero. As a result, Inland Revenue will no longer pay any credit interest. This includes contributions paid to IRD by KiwiSaver members prior to being passed on to their scheme providers.
Rates are reviewed regularly. The last review was in August 2019. This is done to ensure they are in line with market rates.
Inland Revenue maintain that the new rates are consistent with the floating first mortgage new customer housing rate and the 90-day bank bill rate.
Clients are able to utilise tax pooling to minimise the amount of interest paid to Inland Revenue. Generate Accounting is a Premium Accounting Partner of Tax Management New Zealand. You can read more about tax pooling on their website here.