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Income Tax Act 2007

General collection rules - Provisional tax - Table R1: Summary of instalment dates and calculation methods for provisional tax

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

You could also call this:

“How to work out your provisional tax instalments”

This section explains how to calculate the amount of a provisional tax instalment using the standard and estimation methods. You use a formula to work this out:

(residual income tax × instalment number ÷ total instalments) − provisional tax

Here’s what the parts of the formula mean:

  • Residual income tax is your tax from last year plus 5%, or the year before last plus 10%, or an amount you estimate.
  • Instalment number is which payment this is (first, second, or third).
  • Total instalments is how many payments you’ll make in the year.
  • Provisional tax is how much you’ve already paid this year.

If your tax situation changes during the year, you’ll need to update your calculations.

If you expect to pay $60,000 or more in residual income tax, you can choose a different way to calculate your final instalment:

expected residual income tax − tax already paid

When you do these calculations, round down to the nearest dollar. For example, $10.98 becomes $10.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519824.

Topics:
Money and consumer rights > Taxes
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“How to pay provisional tax in instalments”

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RC 10B: Calculating amount of instalment for periods using AIM method, or

“How to work out your provisional tax payments using AIM”

Part R General collection rules
Provisional tax: Table R1: Summary of instalment dates and calculation methods for provisional tax

RC 10Calculating amount of instalment under standard and estimation methods

  1. This section applies for the purposes of—

  2. section RC 5(2), (3), and (5) (which relates to the calculation of a provisional tax liability); and
    1. section RC 9(3) and (5) (which relates to payment of instalments); and
      1. sections RC 13 and RC 14 (which relate to persons with an initial provisional tax liability and those with an extension of time for providing a return); and
        1. sections RC 26 and RC 27 (which relate to changes in taxable periods).

          1. The amount of an instalment of provisional tax is calculated using the formula—

            (residual income tax × instalment number ÷ total instalments)− provisional tax.

            Where:

            • In the formula,—

            • residual income tax is a person’s residual income tax, as applicable—
              1. for the preceding tax year, uplifted by 5% (modified as applicable by sections RZ 5 (Calculating amounts under standard method: 2010–11 to 2012–13 income years) and RZ 5D (Standard method or GST method: transition for Maori authorities); or
                1. for the tax year before the preceding tax year, uplifted by 10% (modified as applicable by sections RZ 5 and RZ 5D); or
                  1. the amount estimated by them:
                  2. instalment number is the number of the instalment for the tax year, whether first, second, or third:
                    1. total instalments is the total number of instalments for the tax year:
                      1. provisional tax is the amount of a person’s provisional tax liabilities for the tax year to date.

                        1. If a change occurs to the balance date or cycle of a person’s taxable periods, the calculation of the amount of an instalment is made under this section, applying the updated figures to the items in the formula.

                        2. A person who uses the standard method may, despite subsection (2), choose that the amount of their final instalment of provisional tax of a tax year is calculated using the following formula, if their expected RIT under subsection (6)(a) is $60,000 or more—

                          expected RIT − tax.

                          Where:

                          • In the formula,—

                          • expected RIT is the person’s expectation of their residual income tax for the tax year:
                            1. tax is the amount of a person’s provisional tax liabilities for the tax year to date.

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

                              Compare
                              Notes
                              • Section RC 10(1)(b): amended, on , by section 530 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                              • Section RC 10(3)(a)(i): amended (with effect on 1 October 2010), on , by section 123(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                              • Section RC 10(3)(a)(i): amended, on , by section 27(a) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                              • Section RC 10(3)(a)(i): amended, on , by section 41(a) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                              • Section RC 10(3)(a)(ii): amended (with effect on 1 October 2010), on , by section 123(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                              • Section RC 10(3)(a)(ii): amended, on , by section 27(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
                              • Section RC 10(3)(a)(ii): amended, on , by section 41(b) of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).
                              • Section RC 10(5) heading: inserted (with effect on 1 April 2019), on , by section 171(1) (and see section 171(3) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section RC 10(5): inserted (with effect on 1 April 2019), on , by section 171(1) (and see section 171(3) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section RC 10(6) heading: inserted (with effect on 1 April 2019), on , by section 171(1) (and see section 171(3) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section RC 10(6): inserted (with effect on 1 April 2019), on , by section 171(1) (and see section 171(3) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section RC 10(7) heading: inserted (with effect on 1 April 2017), on , by section 171(2) (and see section 171(4) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
                              • Section RC 10(7): inserted (with effect on 1 April 2017), on , by section 171(2) (and see section 171(4) for application) of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).