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Income Tax Act 2007

General collection rules - Provisional tax

RC 9: Provisional tax payable in instalments

You could also call this:

“How to pay provisional tax in instalments”

You need to pay provisional tax if you’re liable for it. If you use the standard or estimation methods, you’ll split the amount evenly across the number of instalments. You usually pay in three instalments on specific dates, but this can change depending on your situation.

If you pay GST every six months, you’ll pay provisional tax in two instalments. If you use a GST ratio to work out your provisional tax, you’ll pay in six instalments.

If you use the AIM method, you’ll pay in six instalments if you’re not registered for GST or have a six-month GST period. If you have a two-month GST period, you’ll pay in six instalments that match your GST due dates. For one-month GST periods, you’ll pay in 12 instalments.

Sometimes you might need to pay in one or two instalments, like when you start a new business. If you change your GST cycle or calculation method, your instalment dates might change too.

You can always pay an instalment early if you want to. When working out your instalments, you’ll round the amount down to the nearest dollar.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519822.

Topics:
Money and consumer rights > Taxes
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RC 8: GST ratio method, or

“How to calculate your tax payments using your GST information”

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RC 10: Calculating amount of instalment under standard and estimation methods, or

“How to work out your provisional tax instalments”

Part R General collection rules
Provisional tax

RC 9Provisional tax payable in instalments

  1. This section applies to a person who is liable to pay provisional tax.

  2. For a person liable to pay provisional tax using the standard and estimation methods, the amount of the provisional tax liability must be spread evenly over the applicable number of instalments, so that equal amounts are paid on each instalment date. If the full amount is not divisible into exactly equal instalments, the final instalment carries the difference.

  3. A person pays provisional tax in 3 instalments on the interest instalment dates for the tax year in the months set out in schedule 3, part A, columns B, D, and F (Payment of provisional tax and terminal tax) for the person’s corresponding income year. The amount of each instalment is calculated under section RC 10. Subsection (4) overrides this subsection.

  4. Subsection (3) does not apply—

  5. to a person liable to pay provisional tax who—
    1. pays GST on a 6-monthly basis; or
      1. uses a GST ratio to determine the amount of provisional tax payable, or who changes their calculation method under section RC 18(5); or
        1. changes the cycle of their taxable periods under section 15C of the Goods and Services Tax Act 1985:
        2. to a person with an initial provisional tax liability who—
          1. pays GST on a 6-monthly basis; or
            1. pays GST on a monthly or 2-monthly basis, and starts a taxable activity within 30 days before the date of instalment B in their corresponding income year:
            2. to a person that uses the AIM method for the tax year:
              1. to a person liable to pay provisional tax who has not provided a return of income for the preceding tax year, and whose residual income tax for the tax year before the preceding tax year was $5,000 or less:
                1. in a transitional year.

                  1. A person liable to pay provisional tax who uses the AIM method for the current tax year must pay provisional tax—

                  2. if the person is not registered for GST, or has a 6-month taxable period under section 15 of the Goods and Services Tax Act 1985, on the 6 instalment dates in the months set out in schedule 3, part A, columns A, B, C, D, E, and F for their balance date. The amount of each instalment is provided by section RC 10B; or
                    1. if the person has a 2-month taxable period under section 15 of the Goods and Services Tax Act 1985, on the group of 6 instalment dates in the months set out in either schedule 3, part A, columns A, B, C, D, E, and F or in schedule 3, part A, columns A1, B1, C1, D1, E1, and F1 that corresponds to the due dates for their GST returns. The amount of each instalment is provided by section RC 10B; or
                      1. if the person has a 1-month taxable period under section 15 of the Goods and Services Tax Act 1985, on the 12 instalment dates in the months set out in schedule 3, part A, columns A to F1 for their corresponding income year. The amount of each instalment is provided by section RC 10B.

                        1. A person who chooses to change to the AIM method under section RC 5(5B)(a)(ii) must use the relevant remaining instalment dates for them under the AIM method. The amount of each relevant instalment is calculated under section RC 10B.

                        2. A person liable to pay provisional tax who pays GST on a 6-monthly basis must pay provisional tax on the 2 interest instalment dates for the tax year in the months set out in schedule 3, part A, columns C and F for their corresponding income year. This subsection applies to a person with an initial provisional tax liability other than 1 who pays GST on a 6-monthly basis and starts a taxable activity within 30 days before the date of instalment C.

                        3. A person liable to pay provisional tax who uses a GST ratio to determine the amount of provisional tax payable for a tax year, must pay provisional tax on the 6 ratio instalment dates in the months set out in schedule 3, part A, columns A, B, C, D, E, and F for their corresponding income year. The amount of each instalment is calculated under section RC 11.

                        4. A person who is unable or who decides not to use a GST ratio, changing their calculation method under section RC 18, must pay the provisional tax payable for the tax year on the relevant instalment dates under the replacement method. The amount of each instalment is calculated under section RC 10.

                        5. A person who changes the cycle of their taxable periods under section 15C of the Goods and Services Tax Act 1985 must pay provisional tax for the tax year on the instalment dates set out in section RC 27 after the change in taxable period takes effect. The amount of each instalment is calculated under section RC 10.

                        6. A person with an initial provisional tax liability who starts a taxable activity in a tax year is liable to pay interest calculated under section 120KC of the Tax Administration Act 1994 as if they were liable to pay provisional tax for the tax year—

                        7. in 3 instalments under subsection (3) if they start a taxable activity at some time in the period that starts at the beginning of the corresponding income year and ends 30 days before the date of instalment B:
                          1. in 2 instalments—
                            1. in a case to which section RC 13 applies; or
                              1. if they pay GST on a 6-monthly basis and start a taxable activity at some time in the period that starts at the beginning of the corresponding income year and ends 30 days before the date of instalment C:
                              2. in 1 instalment in a case to which section RC 14 applies.

                                1. A person who has not provided a return of income for a preceding tax year and whose residual income tax for the tax year before the preceding tax year was $5,000 or less must pay provisional tax for the tax year on the instalment dates set out in section RC 13 or RC 14, as applicable.

                                2. In a transitional year, provisional tax is payable as set out in section RC 21 and schedule 3, part B. The amount of each instalment is calculated under sections RC 22 to RC 24.

                                3. A person liable to pay provisional tax may pay an instalment under section RC 12 at any time.

                                4. An instalment calculated under this section is truncated to whole dollars, for example $10.98 equals $10.

                                Compare
                                Notes
                                • Section RC 9(4)(bb): inserted, on , by section 37(1) (and see section 37(4) for application) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                                • Section RC 9(4)(c): amended, on , by section 24(1) (and see section 24(3) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                • Section RC 9(4B) heading: inserted, on , by section 37(2) (and see section 37(4) for application) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                                • Section RC 9(4B): inserted, on , by section 37(2) (and see section 37(4) for application) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                                • Section RC 9(4C) heading: inserted, on , by section 249(1) (and see section 249(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                • Section RC 9(4C): inserted, on , by section 249(1) (and see section 249(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                                • Section RC 9(6): amended, on , by section 37(3) (and see section 37(4) for application) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
                                • Section RC 9(7): amended, on , by section 529(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                • Section RC 9(9): amended, on , by section 170(1) (and see section 170(3) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section RC 9(9): amended, on , by section 529(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                • Section RC 9(9)(b)(ii): substituted, on , by section 529(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                                • Section RC 9(10): amended, on , by section 24(2) (and see section 24(3) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
                                • Section RC 9(13) heading: inserted (with effect on 1 April 2017), on , by section 170(2) (and see section 170(4) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                                • Section RC 9(13): inserted (with effect on 1 April 2017), on , by section 170(2) (and see section 170(4) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).