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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 18: Changing calculation method

You could also call this:

“How to change your method for calculating provisional tax”

When you choose to use a GST ratio to calculate your provisional tax for a tax year, you might need to change your method. This can happen if you decide to use a different way to calculate your provisional tax, or if you have to stop using the GST ratio method.

If you decide to change your method, you need to tell the tax office. They will then tell you how to pay your remaining provisional tax instalments for that tax year.

There are different reasons why you might have to stop using the GST ratio method. These include when your GST registration ends, when your tax assessment changes, when you change your tax period, or when you don’t provide a tax return on time.

If you change your method before your first provisional tax payment is due, you can choose a different way to calculate your tax. It will be like you never chose the GST ratio method in the first place.

If you change your method after you’ve already made some payments, you’ll need to use the estimation method for the rest of your payments. You must tell the tax office about your estimate.

The date when your change takes effect can be agreed between you and the tax office. The number of payments you still need to make will depend on the new method you choose and how often you file GST returns.

You can only change from the GST ratio method to a six-monthly GST cycle if you meet certain conditions and your tax periods line up with your balance date.

The tax office has rules about whether you need to pay interest on your tax payments when you change methods.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519850.

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RC 17: When GST ratio must not be used, or

“Situations when you must stop using a GST ratio for tax payments”

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

RC 18Changing calculation method

  1. This section applies if, after having chosen to use a GST ratio for a tax year, a person liable to pay provisional tax either—

  2. chooses another way to calculate the amount of provisional tax payable for the tax year; or
    1. is required under section RC 17(1) or (2) to stop using a GST ratio for the corresponding income year.

      1. The person must inform the Commissioner of their decision under subsection (1)(a). Subsection (4) or (5) then applies for the remaining instalments of provisional tax for the tax year.

      2. For the purposes of subsection (1)(b), the date on which the person stops using a GST ratio is, as applicable,—

      3. the date their GST registration ends; or
        1. the date of the amended assessment of their income tax liability or GST liability for the preceding tax year; or
          1. the date the person’s return of income referred to in section RC 17(1)(bb) is received by the Commissioner; or
            1. the effective date of a change in taxable period; or
              1. the last day of the period in which a return is liable to be provided under the Goods and Services Tax Act 1985.

                1. If the person is unable or decides not to use a GST ratio before the date of instalment A, and section RC 3(3) does not apply, they may choose to determine the amount of provisional tax payable under section RC 5(2), (3) or (5). The person is treated as never having chosen to use the GST ratio method and, for the purposes of section 120KE(5) of the Tax Administration Act 1994, as never having changed the way they determine an amount of provisional tax under this section.

                2. If the person is unable or decides not to use the GST ratio after an instalment date, and section RC 3(3) does not apply, they must determine the amount of provisional tax payable on instalment for the remainder of the income year under section RC 5(5) using the estimation method. The person must inform the Commissioner of the estimate.

                3. If the person changes their calculation method under subsection (4) or (5), and the change is not required by section RC 17(1)(bb), the date on which the change applies may be a future date agreed between the person and the Commissioner.

                4. For the purposes of this section,—

                5. the number of instalments and the instalment dates remaining for an income year depend on—
                  1. the requirements of the method chosen by the person when they stop using the GST ratio; and
                    1. the cycle of taxable periods chosen by the person, being either a monthly or 2-monthly basis:
                    2. a person may change from using a GST ratio to a 6-monthly cycle of taxable periods only if—
                      1. the requirements of section 15C of the Goods and Services Tax Act 1985 are met; and
                        1. their 6-month taxable period is aligned with their balance date under section 15B of the Goods and Services Tax Act 1985:
                        2. section 120KE(5) to (7) of the Tax Administration Act 1994 applies in deciding whether use of money interest is payable in relation to instalments under the new method.

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                          Notes
                          • Section RC 18(2): amended, on , by section 53(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                          • Section RC 18(2): amended, on , by section 533(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section RC 18(3)(bb): inserted, on (applying for the 2016–17 and later income years), by section 223(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                          • Section RC 18(4): amended, on (applying for the 2016–17 and later income years), by section 223(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                          • Section RC 18(4): amended, on , by section 533(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                          • Section RC 18(5): amended, on , by section 53(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                          • Section RC 18(5): amended, on (applying for the 2016–17 and later income years), by section 223(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                          • Section RC 18(6): amended, on (applying for the 2016–17 and later income years), by section 223(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                          • Section RC 18 list of defined terms inform: inserted, on , by section 53(3) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                          • Section RC 18 list of defined terms return of income: inserted, on , by section 223(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).