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Tax Administration Act 1994

Penalties - Civil penalties

141GC: Grace periods for certain schedular payments

You could also call this:

"Time to fix tax mistakes for some payments"

Illustration for Tax Administration Act 1994

When you make a schedular payment to a non-resident contractor, you might not be sure if you need to withhold tax. If you are unsure and some tax is underpaid, you can demonstrate you took reasonable measures to comply with tax obligations. You have a 60-day grace period to correct your tax obligations if a threshold under section RD 8 is breached. If you fix the underpayment by the end of the 60-day period, you will not have to pay interest under Part 7 or a penalty under Part 9. You must make a reasonable effort to meet your tax obligations during this time. The grace period starts from the date of the breach or when you could foresee the breach. You can find more information about schedular payments in section RD 3 and schedule 4, part A of the Income Tax Act 2007.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS952732.

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Part 9Penalties
Civil penalties

141GCGrace periods for certain schedular payments

  1. This section applies when—

  2. a person (the payer) makes a schedular payment referred to in section RD 3 and schedule 4, part A of the Income Tax Act 2007 to a non-resident contractor; and
    1. at the time of the payment, it is unclear whether the payer is liable to withhold an amount of tax for the schedular payment, whether because of the application of an exemption threshold or otherwise; and
      1. some or all of the amount of tax is underpaid at the due date for payment of the tax; and
        1. the payer is able to demonstrate that they have taken reasonable measures to comply with their tax obligations for the schedular payment.

          1. When a threshold under section RD 8 of that Act has been breached, the payer has a 60-day period (the grace period) during which they must make a reasonable effort to meet or correct their tax obligations relating to the schedular payments made to the person in relation to the time the person was in New Zealand. The grace period starts to run from the earlier of—

          2. the date of the breach:
            1. the date on which the employer could reasonably foresee that a breach will occur.

              1. To the extent to which the payer remedies the underpayment of the amount of tax by the end of the grace period, the payer is not liable to pay interest under Part 7 or a penalty under Part 9.

              Notes
              • Section 141GC: inserted, on , by section 199 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).