Taxpayers who have a year-end “residual income tax” (RIT) liability exceeding $5,000 are generally required to pay instalments of provisional tax. Provisional tax payment dates are aligned with GST payment dates, depending on the GST status and the method used. Most taxpayers pay provisional tax in three instalments, with a payment cycle of five, nine and thirteen months after the start of the income year (see also the Income Tax Payment Due Dates section). However, taxpayers who file six-monthly GST returns pay their provisional tax in two instalments, with a payment cycle of seven and thirteen months after the start of the income year.
Taxpayers can use the tax pooling system to manage their provisional tax payments. Refer to the Tax Pooling section for more details.
Standard method calculations for the 2023 & 2024 tax years:
2022/23 tax year |
|
2022 tax return filed |
2022 tax return not filed |
Companies/PIEs |
105% 2022 RIT |
110% 2021 RIT |
Trusts & Estates |
105% 2022 RIT |
110% 2021 RIT |
Individuals |
105% 2022 RIT |
110% 2021 RIT |
2023/24 tax year |
|
2023 tax return filed |
2023 tax return not filed |
Companies/PIEs |
105% 2023 RIT |
110% 2022 RIT |
Trusts & Estates |
105% 2023 RIT |
110% 2022 RIT |
Individuals |
105% 2023 RIT |
110% 2022 RIT |
Final instalment calculation: if a taxpayer expects their RIT for the current tax year to be $60,000 or more, and has used the standard method for all of the instalments to date, their final instalment amount can be based on the expected RIT less the total of the earlier instalment amounts – they do not need to use the estimation method just for their final instalment.
Estimation method
A taxpayer can estimate or re-estimate their provisional tax up until the last instalment date.
GST ratio method
If a taxpayer is eligible for this method, they base their provisional tax payments on a percentage of the GST taxable supplies, and there are six instalments per year.
Accounting income method (AIM)
If a taxpayer is eligible for this method, they base their provisional tax payments on current year tax-adjusted accounting income. AIM-capable accounting software needs to be used. Taxpayers registered for monthly GST returns make twelve provisional tax payments per year. Those who are not GST-registered, or who are registered for two or six-monthly GST returns, will make six payments per year. A taxpayer can switch to the AIM method part way during a tax year if certain conditions are met.
Interest payable on underpayment or overpayment of provisional tax
Special rules apply if a taxpayer uses the GST ratio method or the accounting income method.
For all other taxpayers, one of the following calculation start dates will apply if any of these statements is true:
- the year’s residual income tax is at least $60,000, or
- the year’s provisional tax was estimated, or
- there has been a “provisional tax interest avoidance arrangement”
From the last instalment date, if all of the following statements are true:
- all the instalments were calculated using the standard method, and
- all instalments (except for the last one) were paid in full and on time, and
- all “provisional tax associates” also calculated all their instalments using the standard method OR used the GST ratio method, and
- there has been no “provisional tax interest avoidance arrangement”
From an earlier instalment date in all other cases