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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 38: Crediting income tax with early-payment discount

You could also call this:

"Get a discount on your income tax if you pay early"

Illustration for Income Tax Act 2007

You pay income tax early, you might get a discount. The Commissioner will put the discount in your tax account. You need to pay your tax on or before your balance date and file your return of income. You must also apply for the discount on or before the last date for filing your return, as stated in section 37(5) of the Tax Administration Act 1994. The discount is calculated using a special rate. This rate is 2% greater than the highest Commissioner's paying rate set by an Order in Council under section 120H of the Tax Administration Act 1994. The discount rate can also be set by the Governor-General by Order in Council, which is secondary legislation, as explained in Part 3 of the Legislation Act 2019. You get the discount if you pay your tax early and have a credit in your tax account. The amount of the discount depends on how much you paid and your residual income tax.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519922.

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Money and consumer rights > Taxes
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Part RGeneral collection rules
Provisional tax: Table R1: Summary of instalment dates and calculation methods for provisional tax

RC 38Crediting income tax with early-payment discount

  1. This section applies when a small-business person—

  2. pays income tax on or before their balance date for the income year; and
    1. during the period from the balance date for the income year to their terminal tax date for the income year, has a credit in their tax account with the Commissioner that is greater than or equal to the lesser of—
      1. the total amount paid under paragraph (a):
        1. the amount that would be their terminal tax for the income year in the absence of this section; and
        2. files a return of income for the tax year corresponding to the income year; and
          1. applies for an early-payment discount on or before the last date for filing a return of income under section 37(5) of the Tax Administration Act 1994.

            1. The Commissioner must credit the tax account of the small-business person with an early-payment discount calculated under subsection (3).

            2. The amount of the early-payment discount is found by multiplying the discount rate under subsection (4) by the lesser of—

            3. the total amount paid under subsection (1)(a):
              1. 105% of the small-business person’s residual income tax for the income year.

                1. The discount rate is—

                2. the rate that is 2% greater than the highest Commissioner’s paying rate set by an Order in Council under section 120H of the Tax Administration Act 1994 that applied at any time during the tax year if no rate is set under paragraph (b):
                  1. the rate set by the Governor-General by Order in Council.

                    1. An Order in Council under subsection (4)(b) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).

                    Compare
                    Notes
                    • Section RC 38(4)(a): replaced (with effect on 1 April 2022), on , by section 113(1) (and see section 113(3) for application) of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                    • Section RC 38(5) heading: inserted, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
                    • Section RC 38(5): inserted, on , by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
                    • Section RC 38 list of defined terms apply: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).