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Income Tax Act 2007

General collection rules - Provisional tax

RC 6: Standard method

You could also call this:

“How to calculate your provisional tax payments using your previous year's tax”

When you need to pay provisional tax, you use the standard method to figure out how much to pay. This method is based on your residual income tax from the previous year.

Your residual income tax is usually based on your tax assessment from the year before. But if the Commissioner of Inland Revenue sends you a notice of assessment at least 30 days before your tax instalment is due, you’ll use that amount instead.

If you haven’t sent in your tax return when you should have, or if you’re not required to send one, the Commissioner’s assessment will be used to calculate your residual income tax.

You’ll use your residual income tax from the previous year to calculate your provisional tax if you don’t need to provide a tax return for that year. The same applies if your residual income tax two years ago was $5,000 or less, and you didn’t need to provide a return for the previous year by instalment F.

If the Commissioner changes your income tax assessment after you’ve already paid an instalment, and this would increase your residual income tax, the increase won’t affect your provisional tax payments.

If you’re in a transitional year, your residual income tax is calculated differently. You can find out how in section RC 20. For consolidated groups, the calculation is explained in section RC 29.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519812.

Topics:
Money and consumer rights > Taxes
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RC 5: Methods for calculating provisional tax liability, or

“Different ways to calculate how much provisional tax you need to pay”

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RC 7: Estimation method, or

“How to estimate and pay your provisional tax”

Part R General collection rules
Provisional tax

RC 6Standard method

  1. This section applies to a person liable to pay provisional tax for the purposes of section RC 5(2) and (3) and the calculation of the amount of provisional tax payable for a tax year under the standard method.

  2. The person’s residual income tax for a tax year is based on their assessment for the preceding tax year unless the Commissioner has sent out a notice of assessment for the tax year at least 30 days before the relevant instalment date, in which case the amount of residual income tax is based on the Commissioner’s assessment for the preceding tax year.

  3. The person’s residual income tax is based on the Commissioner’s assessment for the preceding tax year, whenever the assessment is made, if—

  4. they are required under sections 33 and 37 of the Tax Administration Act 1994 to provide a return of income for the preceding tax year but have failed to do so by the relevant instalment date; or
    1. they are not required under sections 33 and 37 of that Act to provide a return by the relevant instalment date, and subsections (2) and (4) do not apply.

      1. The amount of provisional tax payable for a tax year is the amount of the person’s residual income tax for the preceding tax year if—

      2. they are not required to provide a return of income for the preceding tax year; or
        1. their residual income tax for the tax year before the preceding tax year was $5,000 or less, and they were not required to provide, and have not provided, a return of income for the tax year by the date of instalment F for the corresponding income year.

          1. If the Commissioner’s assessment of a person’s income tax liability occurs after the payment date for an instalment of provisional tax and would result in an increase in the person’s residual income tax for the relevant tax year, the residual income tax is treated for the purposes of the provisional tax rules as if it had not been increased.

          2. A person’s residual income tax in a transitional year is calculated under section RC 20. For consolidated groups, the calculation is made under section RC 29.

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          Notes
          • Section RC 6(4)(b): amended, on , by section 23(1) (and see section 23(2) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
          • Section RC 6(5): amended (with effect on 1 April 2008), on , by section 112 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).