Skip to content
GLOSSARYTERMS AS A CREDIT DESK USES THEM

Cash taxes (tax paid)

What are cash taxes, and why does a lender use tax paid rather than the tax charge?

ONE OF 416 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

Cash taxes are the income tax a business pays in a period, as its cash flow statement shows where it has one, rather than the tax charge in its income statement. The two differ through deferred tax, tax losses carried forward and timing: New Zealand provisional tax and Australian PAYG instalments are paid through the year, larger UK companies pay quarterly instalments, partly after the year end unless profits are very large, and smaller ones nine months and a day after it. A lender uses tax paid in free cash flow and cover, and reads a gap about to close, as losses run out, as less cash for debt service.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// THE FULL PAGE

Cash Taxes: a Worked Example →

The profit and loss account accrues the tax. The bank account pays it.

// WORKED IN

// NEXT TO IT

READING THE NUMBERS

All 416 terms on one page