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Your provisional tax explained

Your provisional tax equals your previous year’s residual income tax plus 5%. However, provisional tax paid in the past may not reflect how your business has performed over the current financial year.

Your final income for this financial year will determine whether you’ve overpaid or underpaid provisional tax. Once you’ve filed your accounts, you might get a tax refund or have to pay more, depending on your 2023-2024 taxable income.

Underpaid tax can lead to use of money interest (UOMI) being charged by Inland Revenue, and UOMI has increased in recent years.

If you believe you’re likely to underpay or overpay provisional tax based on your current years income, contact us to discuss options including tax financing which may help with cashflow.

Your First Year in Business

You will have tax to pay on your first year profits, you just won't have to pay until year 2.

But you will want to pay tax in the first year of business if:

  • If you use the AIM method.

  • If your income is greater than $207,000.

  • If you want a discount on the tax payable, subject to a specific criteria. From 1 April 2022 to 31 March 2023 the early payment discount rate is 4.31%.

The disadvantage of not paying tax in year 1, is that in year 2, you then have two years worth of tax to pay.

Use of Money Interest (UOMI)

If you pay too little or too much in tax IR charge interest on the shortfall, and pay you interest on overpayments. If you want to minimise this finance charge then let us know and we can check in with you each provisional tax payment date.

Tax Due Dates

Your due dates depend on when your balance date is, whether you've filed your tax return on time, and whether you have an accountant or not. Generally, for a March balance date you would have payment dates of:

For two-monthly GST Registered Clients:

  • Provisional Tax

    • 28 August

    • 15 January

    • 7 May

  • Terminal Tax

    • 7 April

For six-monthly GST Registered Clients:

  • Provisional Tax

    • 28 October

    • 7 May

  • Terminal Tax

    • 7 April

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