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Income Tax Act 2007

Core provisions - Calculating and satisfying income tax liabilities

BC 8: Satisfaction of income tax liability

You could also call this:

“How tax credits are used to pay your income tax”

You have tax credits that can help pay your income tax for the year. These credits come from tax you’ve already paid, tax that’s been held back for you, or other situations. The government works out these credits using special rules.

Your tax credits can pay off some or all of your income tax. If you have enough credits, they might cover all the tax you owe.

There’s a specific order for using your credits. You can find out more about this order in section LA 4.

Sometimes, your tax credits might not cover all the tax you owe. If this happens, you’ll need to pay the difference. This leftover amount is called your ‘terminal tax’.

If you have any credits left after paying all your tax, section LA 5 explains what happens to them.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512355.

Topics:
Money and consumer rights > Taxes
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Part B Core provisions
Calculating and satisfying income tax liabilities

BC 8Satisfaction of income tax liability

  1. Credits for tax paid, tax withheld, or other circumstances, calculated under Parts L (Tax credits and other credits) and M (Tax credits paid in cash), satisfy a person's income tax liability for a tax year as far as the credits extend.

  2. The order in which the person uses their credits is set out in section LA 4 (When total tax credit more than income tax liability).

  3. If the person's income tax liability is more than the total of their credits, the difference is the person's terminal tax. The person must pay the terminal tax to complete the satisfaction of their income tax liability.

  4. The treatment of any credits remaining after the person's income tax liability is satisfied is dealt with in section LA 5 (Treatment of remaining credits).

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