NZ Taxation Advisory Blog

The provisional tax due dates are established in the Income Tax Act 2007, specifically in:  Section RC 9(2) and (3). These sections reference Schedule 3, Part A, Columns B, D, and F, which for the month of March as the month of balance date, correspond to the following calendar dates: 28 August, 15 January, 7 May . It’s not uncommon for a tax agent to finalize a client’s tax return as late as 31 March of the following year, especially under extension of time (EOT ) arrangements. This means that by the time the taxpayer's final tax position is determined, the first or even second provisional tax payment may be past. If the latest available assessment is not from the immediate preceding year, IRD allows tax to be calculated based on the tax year before the preceding year, uplifted by 10% . Links Income Tax Act 2007 – Section RC 9 Income Tax Act 2007 – Schedule 3 IRD – Payment Dates for Provisional Tax IRD – Standard Option for Provisional Tax

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...