Home > Updates > UOMI – is it time for the Government to rethink how it calculates them?
On 29 August 2023 the use of money interest (UOMI) rate increased to 10.91% for underpayments of tax and to 4.67% for overpayments of tax. This is the third rate increase for 2023. Clearly there are still some challenging times ahead of us and these rates will no doubt continue to remain at these levels for the foreseeable future.
Whilst this level of UOMI rate is nothing new from a historical perspective, (it was 14.24% for some time during 2007 to 2009), is it appropriate in the current recessionary environment?
The newspapers have been inundated with articles on the current cost of living crisis and the call for the Government to step in and assist. Small businesses in New Zealand however continue to be overlooked. While there have been some changes for taxpayers using the standard option for calculating their provisional tax, there are still many cases where taxpayers drop into the UOMI regime inadvertently.
UOMI rates appear to be an easy area the Government could review. This would ensure that businesses are not smacked over the head when they get things wrong, such as when they have incorrectly paid their provisional tax payments. The IRD often tout that UOMI is not a penalty – although I’m sure that anyone that has been on the other end of UOMI would beg to differ.
In addition, the IRD continually states its powers to remit UOMI are extremely limited. Why? Is this just poor legislation? Perhaps this should also be reviewed so that the Commissioner’s powers to remit UOMI are in line with the Commissioner’s powers to remit late payment penalties. The Commissioner should also be able to use their discretion to remit UOMI where appropriate.
If you have any questions regarding UOMI please contact your Nexia advisor. If you are not already a Nexia client and you are looking for specialist tax advice or strategies for effective tax planning, contact us to explore how we can help.