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BC 6: Income tax liability of filing taxpayer
or “How to calculate the income tax you owe if you file a tax return”
You could also call this:

“How tax is calculated when you have income from specific sources”

When you have schedular income in a tax year, your income tax liability is made up of two parts. The first part is your schedular income tax liability, and the second part is the tax you would pay on your other income.

If you have only one type of schedular income, your schedular income tax liability is the amount of tax you would pay if that was your only income for the year.

If you have more than one type of schedular income, your schedular income tax liability is the total of the tax calculated for each type of schedular income.

For multi-rate PIEs (a type of investment), the income tax liability is worked out differently, using rules in subpart HM.

If you’re a person living in New Zealand who invests in a multi-rate PIE, and the tax rate used for the year doesn’t match your prescribed investor rate, there’s a special calculation in section HM 36B. This adjusts the amount of income tax you pay on your other income.

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Next up: BC 8: Satisfaction of income tax liability

or “How tax credits are used to pay your income tax”
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Part B Core provisions
Calculating and satisfying income tax liabilities

BC 7Income tax liability of person with schedular income

  1. The income tax liability for a tax year of a person who has schedular income for the year is the total of—

  2. their schedular income tax liability for the year calculated under subsection (2) or (3); and
    1. the amount that would be their income tax liability for the year if they had no schedular income.

      1. If a person has 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the amount that would be the income tax liability for the year if their only income for the year were that schedular income.

      2. If a person has more than 1 kind of schedular income for a tax year, their schedular income tax liability for the year is the total of the amounts calculated for each kind of schedular income.

      3. The income tax liability for a tax year of a multi-rate PIE is determined under subpart HM (Portfolio investment entities).

      4. The schedular income tax liability of a natural person who is resident in New Zealand and is an investor in a multi-rate PIE, when the rate of tax applied for the year is not equal to the investor’s prescribed investor rate for the year, is calculated under section HM 36B (Calculating PIE schedular income adjustments for natural person investors) to provide an adjustment to the amount of the person’s income tax liability referred to in subsection (1)(b).

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      Notes
      • Section BC 7(4) heading: added, on (applying for the 2010–11 and later income years), by section 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section BC 7(4): added, on (applying for the 2010–11 and later income years), by section 4(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section BC 7(5) heading: inserted, on , by section 83(1) (and see section 83(2) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section BC 7(5): inserted, on , by section 83(1) (and see section 83(2) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
      • Section BC 7(5): amended, on , by section 5(1) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section BC 7(5): amended (with effect on 1 April 2020), on , by section 5(1) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section BC 7 list of defined terms multi-rate PIE: inserted, on , by section 4(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section BC 7 list of defined terms natural person: inserted, on , by section 5(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Section BC 7 list of defined terms prescribed investor rate: inserted (with effect on 1 April 2020), on , by section 5(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section BC 7 list of defined terms resident in New Zealand: inserted, on , by section 5(2) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
      • Flowchart B4: amended, on , by section 5 (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).