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Upcoming provisional tax instalment dates

7

May

March, June, November balance dates

 

28

May

December, August, April balance dates

 

28

June

January, September, May balance dates

 

28

July

February, October and June balance dates

 

Note: If any of the dates above fall on a weekend, then the new due date will be the next working day.

If you have any questions around your due dates please don’t hesitate to contact us directly on 0800 555 024 or email info@rightway.co.nz

AIM - A new method for calculating your provisional tax 

A new method for calculating your provisional tax came into effect 1 April 2018 and it could make paying your provisional tax a whole lot easier.

 

The Accounting Income Method, otherwise known as AIM calculates your provisional tax based on your profit for the year to date. Your payments are aligned with your GST return and are paid either monthly or two monthly. Think of it as PAYE for businesses.

 

AIM IS A SUITABLE OPTION FOR:

  • New businesses

  • Growing businesses

  • Businesses with unpredictable income

  • Seasonal businesses

  • Businesses who want to keep on top of their tax during the year

WHAT ARE THE BENEFITS?

  • Better for your cash flow – pay tax on your profits as you earn them
  • No Use of Money Interest as long as you pay what the system says you should
  • No Penalties as long as you take reasonable care
  • If your profits drop during the year and you’ve paid too much tax you can get a refund during the year instead of waiting until your tax return is filed

AM I ELIGIBLE?

You can use AIM to calculate your provisional tax if:
  • Your sales are under $5 million per year
  • You use AIM approved software, e.g. Xero
  • You are a company or a sole trader
  • You don’t have any foreign investment income
  • You don’t offset losses between your businesses

 

 

If you have any questions regarding AIM please don’t hesitate to contact us
directly on
 0800 555 024 or email info@rightway.co.nz

Tax
calendar

Tax Calendar 2017 - 2018

Now avaliable to download

Income tax
flowchart

Download our helpful income tax

flowchart 

AIM information sheet

Download our helpful AIM information
sheet

Frequently asked questions

Q

What is the difference between Provisional Tax and Terminal Tax?

A

Provisional and Terminal tax are both types of Income Tax. Once a taxpayer’s year end profit is finalised, the total Income Tax liability is calculated based on the taxpayers tax rate (eg, for a company the tax rate is 28%). This total amount can be paid by either Terminal Tax after year end and/or Provisional Tax during the year, depending on the circumstances.

 

Terminal Tax is the actual amount of tax that is due after a tax return is finalised and assessed by the Inland Revenue. Terminal Tax for a financial year is generally paid a decent length of time after the balance date of the entity passes (eg, for most 31 March balance dates, Terminal Tax is due 13 months later on 7 April).

 

Many entities are also required to pay Income Tax in the form of Provisional Tax. This is ‘guessed’ tax which is paid during a financial year for that financial year. Then at year end once the tax return is calculated, if Provisional Tax has been under or over paid then the entity is either liable for a Terminal Tax payment or owed a Terminal Tax refund. Therefore the addition of Provisional and Terminal Tax paid by one entity for a financial year is the total Income Tax liability. See below for the methods of how Provisional Tax is calculated.

Q

How does Inland Revenue calculate your provisional tax?

A

Inland Revenue's default method (known as uplift method), is generally calculated based on a persons last filed income tax return. Its calculated as 105% of previous years income tax liability (or 110% if you haven't filed the last years return by the provisional tax due date). Download our helpful tool.

This works great (well that might be a stretch) for business and/or individuals that earn generally the same year on year. But if you have any significant changes to your bottom line this will result in a significant under or overpayment in tax and having your hard earned cash sitting unnecessarily with Inland Revenue will NOT be a good return on investment (Inland Revenue are only paying out 1.02% on any overpaid tax!).

 

Please contact your RightWay team if you think your income has changed signifcantly so we can discucss with your the impact this will have on your tax payments. For more information from the IRD, click here.

Q

When should I be paying provisional tax?

A

This depends on when the tax paying entity’s balance date is. Generally, provisional tax is paid in three equal instalments during the financial year. If an entity is six-monthly registered for GST then provisional tax is paid in two equal instalments.

 

For a taxpayer with a March balance date, who isn’t six-monthly registered for GST, then Provisional Tax will be due, if required, on 28 August, 15 January and 7 May each year with Terminal Tax due on the following 7 February or 7 April. If you have a different balance date, please contact us or use the following IRD link to work out when your provisional tax is due here.

 

It’s not an exact science and there are reasons why you may or may not owe tax, or the instalments may not be equal. If you’re unsure and would like some help with planning when your tax will fall due, please let us know.

Still have questions? You can download more frequently asked questions below.

How we can help you

  • Assist you with your Annual budget and/or cash flow forecast
  • Prepare a tax forecast with you
  • Send reminders ahead of any due dates
  • Help finance with tax pooling intermediaries
  • Assist you with tax planning
  • Help set up tax payment plans with Inland Revenue on your behalf

Help centre

bus-income-tax.png

If you are running a business, you will need to fill out a tax return each year and send it to IRD by the due date.

Read more here.

Provisional tax

Provisional tax makes it easier to pay your income tax by spreading the payments over the year. If your end-of-year tax was more than $2,500 then you'll have to pay provisional tax the following year.

Provisional tax guide

prov-tax-guide.png

Provisional tax is a way of spreading your tax payments throughout the year. If you have income tax to pay of more than $2,500 from your last income tax year you'll most likely become a provisional tax payer.

Download the guide here.

Income and provisional tax

income-prov-tax.png

If you own a business or are self-employed, you’ll pay tax in one lump sum or several instalments. This way of paying income tax is called provisional tax.

Read more here.