NZ Taxation Advisory Blog

Paying a large lump sum of income tax at the end of the financial year can be challenging. Provisional tax helps to spread out tax payments throughout the year instead. Provisional tax is a method of paying income tax in instalments during the year, based on an expected income. If the provisional tax paid exceeds the actual income tax liability, a tax refund is issued after the annual income tax assessment is completed. As of 2015, the threshold for provisional tax is $5,000 of residual income tax (RIT). If RIT is below this threshold, provisional tax does not need to be paid. To calculate provisional tax, an estimate of income for the upcoming year must be made. This process involves a degree of judgment and forecasting. There are four available methods (as of 2025) for calculating provisional tax, depending on the nature of income and business operations: 1. Accounting Income Method (AIM) Requires the use of AIM-capable accounting software such as Xero or MYOB. The software submits...

Under section 35 of the Tax Administration Act 1994 [1]  , the Commissioner of Inland Revenue has the authority to prescribe forms and electronic formats necessary for administering tax laws.  Examples include: IR3 : Individual income tax return IR4 : Companies income tax return IR10 : Financial statements summary  Links https://legislation.govt.nz/act/public/1994/0166/latest/DLM351125.html#DLM351125

T he ring-fencing of residential property deductions was introduced through the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019. This legislation established a framework for limiting how residential property deductions can be applied, with key provisions outlined under Subpart EL of the Income Tax Act 2007. Introduction of Subpart EL The new Subpart EL, titled Allocation of deductions for excess residential land expenditure , outlines the mechanism for allocating residential property losses. It emphasizes a more restrictive approach to deductions, ensuring residential losses cannot offset income from unrelated sources. Limited Allocation – Section EL 4(2) Section EL 4(2) specifies: "The amount of the deduction that may be allocated to the income year must be no more than the amount of the person’s residential income for the income year. An amount identified as a person’s residential income may be counted only once in making an...

When finalising individual accounts, Section 22H of the Tax Administration Act outlines key distinctions between "qualifying individuals" and other individuals. This process ensures accurate reporting of income, leveraging prepopulated accounts for simplicity and efficiency. Section 22D(1) and (2) defines these terms : An individual is simply a natural person. A qualifying individual is an individual whose income consists only of "reportable income," such as PAYE income and passive income. This information is pre-submitted to the commissioner and available in a prepopulated account. Prepopulated Account defined under Section 22D(5), a prepopulated account includes income details already provided to the commissioner, serving as the basis for finalisation. Process for Finalizing Accounts Qualifying Individuals For qualifying individuals, the commissioner has the authority to finalise income details using the prepopulated account, as stated in Section 22H(1). This elim...

Under Section 22F of the Tax Administration Act 1994, individuals are obligated to provide income information for certain types of income.  I ncome Types Requiring Reporting Individuals must report two categories of income: Other Income This includes income listed under Schedule 8, Part A, Table 1 of the Act, which encompasses various income streams. There is a de minimis provision under Section 22K for "other income" of $200 or less. In such cases, the obligation to report may not apply. Reportable Income Not Included in Prepopulated Accounts If an individual knows—or might reasonably be expected to know—that certain reportable income has been excluded from their prepopulated account, they are obligated to disclose it. The legislation's wording emphasizes a negative framing. By understanding and adhering to the reporting obligations under Section 22F, individuals can ensure compliance with the Tax Administration Act. Links Tax Administration Act 1994 – Section 22F: Repor...

Under TAA 1994, Part 3, which covers information, record-keeping, and returns, Subpart 3B  is reporting of income information by individuals. Specifically, Section 22C(2) defines income an individual derives for a tax year as either reportable income or other income. This section also includes a helpful flowchart scheme for better understanding. Reportable Income The term "reportable income" is explained in Section 22D(3) under key terms. This includes: PAYE income, Passive income, and PIE income, for which the relevant information has been provided to the Commissioner. Other Income Income categorized as "other income" is outlined in Schedule 8, Part A, Table 1. This includes: Income from a trust, Self-employment income, Partnership income, Look-through company (LTC) income, and Other types of income, such as income from the disposal of property not classified as reportable income. Links TAA 1994, Section 22C(2) TAA 1994, Section 22D - Key Terms TAA 1994, Schedule 8...

Under the Tax Administration Act 1994 (TAA 1994), Part 3, which covers information, record-keeping, and returns, Subpart G - Returns establishes the general principle in Section 33 that every person must file an income return for a tax year. Taxpayer Responsibilities To file this return, a taxpayer must complete an assessment, which includes: Determining taxable income, Calculating income tax liability, Reporting any net loss, Identifying the terminal tax or refund due, in accordance with TAA 1994, Part 2 - Assessment, Section 92. The deadlines for submitting the annual return after completing the assessment are outlined in Section 37. Links TAA 1994,Information, record-keeping, and returns (Section 33) TAA 1994,Assessment (Section 92) TAA 1994,Subpart 3G - Returns (Section 33) TAA 1994,Return dates (Section 37)