Provisional Tax
Provisional tax is a way of managing your income tax by paying compulsory instalments during the year:
- The number of instalments you are required to make depends on the way you choose to calculate your provisional tax instalments. If you're GST-registered, how often you file GST returns also determines how many provisional tax instalments you're required to make.
- The amount of provisional tax you need to pay is based on your expected profit for the year or your GST taxable supplies (sales) and depends on the way you choose to work out your provisional tax instalments.
- At the end of the year you pay or are refunded the difference between the amount of provisional tax you paid and the amount you should have paid, based on your actual profit for the year.
If your residual income tax (tax to pay) on your last income tax return is more than $2,500, you'll have to pay provisional tax for the following year.
You can use one of these options to work out your provisional tax:
- standard
- estimation
- ratio option
The ratio option can only be used from the 2008-2009 tax year onwards, and you also need to be registered for GST.
Due Dates: if you have a 31 March balance date, provisional tax payments are due on:
| First instalment | 28 August |
| Second instalment | 15 January |
| Third instalment | 7 May |
For more information on calculating your provisional tax, please talk to us or visit the IRD website.
