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Tax Administration Act 1994

Interest - General provisions

120F: Interest priority and rights of Commissioner

You could also call this:

"How the Commissioner uses your money to pay off tax debts and interest"

Illustration for Tax Administration Act 1994

When you pay money towards your tax debt, the Commissioner uses it in a certain order. They pay off the interest on your oldest unpaid tax first, then the tax itself. They keep doing this with each unpaid tax amount, paying the interest first, then the tax. If you have paid too much tax, the Commissioner may use the extra money to pay off your unpaid tax. They can only do this if the law allows it. If you owe the Commissioner interest on unpaid tax, and they owe you interest on overpaid tax, they can work out the net amount of interest. They can either charge you the net amount or pay you the net amount. The Commissioner includes any unpaid penalties with your unpaid tax when working out how much you owe. They treat the tax and penalty as a single amount.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM355151.

Topics:
Money and consumer rights > Taxes
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Part 7Interest
General provisions

120FInterest priority and rights of Commissioner

  1. The Commissioner must apply amounts paid on account of a taxpayer’s liability for unpaid tax and interest for a return period using the following pattern and order:

  2. apply against interest on the amount of unpaid tax that arises first for the return period (the earliest unpaid tax) until that interest is paid; then
    1. apply against the earliest unpaid tax, until that tax is paid; then
      1. apply against the interest on the amount of unpaid tax that arises next for the return period (the next unpaid tax) until that interest is paid; then
        1. apply against the next unpaid tax, until that tax is paid; then
          1. apply to each later arising interest and unpaid tax amount, interest first, in time order that relevant unpaid tax amount arises for the return period, until they are paid.

            1. The Commissioner may apply interest payable by the Commissioner to a taxpayer towards the payment of the taxpayer's unpaid tax on or after the date the taxpayer furnishes their return of income.

            2. The Commissioner may apply interest under subsection (2) only if the Commissioner is not prevented, by a tax law, from applying the relevant overpaid tax towards the payment of the tax.

            3. If, for a period,—

            4. a taxpayer is liable to pay the Commissioner interest on unpaid tax; and
              1. the Commissioner is liable to pay the taxpayer interest on overpaid tax,—
                  1. the Commissioner may—
                1. assess the taxpayer for the net amount of interest payable by the taxpayer for the period; or
                  1. pay the taxpayer the net amount of interest payable by the Commissioner for the period.

                    1. In this section, the expressions unpaid tax and overpaid tax include—

                    2. any tax which has not been paid or which has been overpaid; and
                      1. any civil penalty imposed in respect of that tax which has not been paid or which has been overpaid,—
                          1. as if the tax and the civil penalty were a single tax type.

                        Notes
                        • Section 120F: inserted, on , by section 36(1) of the Tax Administration Amendment Act (No 2) 1996 (1996 No 56).
                        • Section 120F(1): replaced (with effect on 17 April 2018), on , by section 78(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                        • Section 120F(2): replaced, on (applying on and after 1 April 1998), by section 48(1) of the Taxation (Beneficiary Income of Minors, Services-Related Payments and Remedial Matters) Act 2001 (2001 No 4).
                        • Section 120F example: inserted (with effect on 17 April 2018), on , by section 78(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).