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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 23: Calculating instalments in transitional years: estimation method

You could also call this:

“Estimating provisional tax instalments for a transitional year”

When you need to calculate your provisional tax instalments during a transitional year using the estimation method, you need to follow some specific rules. This applies to all instalments except the final one.

For each instalment before the final one, you need to work out how much to pay using a special calculation. You start with your estimated tax amount for the year. Then you multiply this by the number of instalments you need to pay, multiplied by either 4 or 6 (depending on your payment schedule). You divide this by the number of months in your transitional year. Finally, you subtract any tax you’ve already paid.

For the last instalment, you pay whatever is left of your estimated tax after taking away what you’ve already paid in earlier instalments.

Your estimated tax amount is the amount you last calculated using the method described in section RC 5(5).

The number of instalments you use in the calculation depends on your payment schedule. If you pay on dates like B, D, and F, you multiply by 4. If you pay on dates like C and F, you multiply by 6.

Remember, these rules are specifically for calculating provisional tax during a transitional year when you’re using the estimation method.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519878.

Topics:
Money and consumer rights > Taxes
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RC 22: Calculating instalments in transitional years: standard method, or

“How to calculate tax instalments when your tax year changes”

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RC 24: Calculating instalments in transitional years: GST ratio method, or

“How to calculate tax instalments during a year when your income year changes if you use the GST ratio method”

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

RC 23Calculating instalments in transitional years: estimation method

  1. This section applies to a person liable to pay provisional tax using the estimation method in relation to instalments of provisional tax payable in a transitional year under section RC 21.

  2. For an instalment date other than the date of the final instalment, the person must pay an amount calculated using the formula—

    (tax estimate × instalments payable÷ transitional months) − tax previously payable.

    Where:

    • In the formula,—

    • tax estimate is the person’s provisional tax liability last estimated by the person under section RC 5(5):
      1. instalments payable is either—
        1. 4 multiplied by the number of instalments in the person’s transitional year payable on or before the instalment date, for a person who pays on the equivalent of instalment dates B, D, and F; or
          1. 6 multiplied by the number of instalments in the person’s transitional year payable on or before the instalment date, for a person who pays on the equivalent of instalment dates C and F:
          2. transitional months is the number of months in the person’s transitional year:
            1. tax previously payable is the amount of provisional tax for a tax year calculated on the basis of the person’s transitional year that is payable before the instalment date.

              1. For the final instalment, the person must pay the amount calculated under section RC 5(5) less the amount of any instalment previously payable.

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