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RC 18: Changing calculation method
or “How to change your method for calculating provisional tax”
You could also call this:

“How selling a business asset can affect your provisional tax”

If you need to pay provisional tax and you sell an asset that’s part of your business, you might be able to change how much tax you pay. This applies if the asset isn’t something you usually sell as part of your business and if it’s worth at least $1,000 or 5% of what your business sold in the last year, whichever is more.

You can choose to lower the amount of your taxable supplies by taking off the value of the asset you sold. This affects how much provisional tax you need to pay. You can do this for both the tax period when you sold the asset and for the whole tax year.

If you decide to do this, you need to tell the tax office about selling the asset and how much you sold it for. When you’re working out if the asset is worth 5% of your sales, you should round the percentage to a whole number.

This rule is part of section RC 16(2) and (3) of the Income Tax Act 2007. It uses some ideas from section RC 11(1) and section RC 8(2) of the same Act, and section 20(4) of the Goods and Services Tax Act 1985.

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Next up: RC 20: Calculating residual income tax in transitional years

or “How to adjust residual income tax for transitional years”
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Part R General collection rules
Provisional tax: Table R1: Summary of instalment dates and calculation methods for provisional tax

RC 19Disposal of assets

  1. This section applies if, as part of the taxable activity of an entity referred to in section RC 16(2) and (3), a person who is liable to pay provisional tax, disposes of an asset—

  2. that is not revenue account property; and
    1. the value of the supply of which is not less than the greater of—
      1. an amount equal to 5% of the total taxable supplies of the business for the previous 12 months; or
        1. $1,000.

        2. The person may choose to take the disposal of the asset into account in adjusting their taxable supplies for the relevant taxable period and income year, by subtracting the value, including GST, of the asset from—

        3. the total taxable supplies for a taxable period for the purposes of the formula in section RC 11(1), in proportion to the output tax which is attributed under section 20(4) of the Goods and Services Tax Act 1985 to that taxable period for the supply of the asset:
          1. the base amount of total taxable supplies for the corresponding income year under section RC 8(2), in proportion to the output tax which is attributed under section 20(4) of that Act to a taxable period in that income year for the supply of the asset.

            1. For the purposes of subsection (2), the person must inform the Commissioner of both the disposal of the asset and the value of its supply.

            2. In the determination of the value of the supply of the asset under subsection (1)(b)(i), the amount must be rounded to a whole percentage number.

            Compare
            Notes
            • Section RC 19(2): substituted, on , by section 534 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
            • Section RC 19(2)(a): amended, on (with effect on 1 April 2008), by section 184 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
            • Section RC 19(3): amended, on , by section 54(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
            • Section RC 19 list of defined terms inform: inserted, on , by section 54(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).