Provisional Tax Payment Options

A reminder about Provisional Tax due 7 May for many clients.

Here are some payment options available to you:

Pay full amount due – Have funds put aside and can pay now

When you receive the tax payment letter from us:

1. Log in to your internet banking and select tax payment
2. Choose INC Income Tax and the correct year
3. Schedule the payment for the due date.

Payment Arrangement – uncertain of income but can manage some payments (instalment)

If you don’t believe you can make the payment when due, we can help arrange a repayment schedule with IRD. The risk of this is that you will be charged some penalties and interest (see special rules currently for COVID-19 below).

Tax Finance – know you will have funds in future (lump sum)

This method suits those who have income coming in later months and want to use their current cash or working capital for other payments, or minimise interest on bank overdraft.

If you know you will have income coming in a later month (timing of sales, or receipt of customer payments) you can “book” in the tax payment then with TMNZ and pay a small interest fee for this service. TMNZ locks in the amount for you, and as long as you pay the tax by the date on time, there are no penalties and tax is transferred to IRD at the original date.

Tax Deposit – have funds but aren’t sure of required tax or require certainty (lump sum)

This method is useful for large groups of entities with a large total tax liability or when total tax is uncertain (farming clients, uncertain timing of completion of large projects or jobs), or you want certainty you have tax payments secured. If the tax you have deposited is no longer required, you can get the cashback more quickly than if paying to IRD, and earn interest on this.

Flexitax – catch up on old tax amounts as well as future commitments or want to make payments as cashflow allows (instalment)

This method suits those who are uncertain about the tax year ahead. If you have missed a tax payment (even by a day) or want flexibility in your payments. There are no set amounts or payment dates. You pay what they can and when it suits their business cashflow. Saves up to 30% on IRD interest.

It is important to keep your tax plan current. If circumstances change for your business, we need to adjust your plan. Let us know as soon as you can about the situation for your business.

Contact us [email protected] or (06) 878 8824 to discuss any of the above options or what may be most suitable for your situation.

COVID-19 and provisional tax

COVID-19 has created exceptional circumstances and some exceptional tax relief measures have been introduced:

• The residual income tax (RIT) threshold for provisional tax increased from $2,500 to $5,000 from the 2020/21 tax year
• Depreciation for commercial and industrial buildings is reintroduced from the 2020/21 income year. If you are a building owner, you will be able to adjust provisional tax payments immediately in anticipation of additional deductions that become available
• If your business is affected by COVID-19 and:
  • you need to re-estimate your provisional tax as your income falls short of the estimate and provisional tax has been overpaid, it may be possible to arrange early refunds
  • you are unable to pay tax by the due date, Inland Revenue has the discretion to write-off penalties and interest. When in a position to do so, you should indicate when you can pay the tax, or request instalment arrangements. You may be eligible for a UOMI write off.

You can find more COVID-19 tax information here:

• The TMNZ website
• The IRD website

Hardship Application – unable to make payments

In a serious hardship situation where you cannot make any payments, and future income is uncertain, we can assist you with this process with IRD.