Business Development Taxation Accounting Services Albany North Shore

Tax Planning and Advisory

If, during the year, you have earned income which has either not been taxed, or, has not had enough tax deducted from it, and your end of year tax to pay works out at $2,500 or more, you will be required to pay provisional tax for the following year.
Provisional tax is usually paid in three installments. The installment dates depend upon the taxpayer's balance date. At RES the majority of our clients have the balance date on the 31st of March, therefore provisional tax is due on the:

Month of Balance Date	1st Installment of Provisional Tax (4th Month after Balance Date)	2nd installment of Provisional Tax (8th Month after Balance Date)	3rd Installment of Provisional Tax (being the month preceding the Balance Date)	Terminal Tax if the Tax Payer does not have a Tax Agent	Terminal Tax if the Tax Payer has a Tax Agent
March	July	November	March	February	April

As you can see, provisional tax is payable every four months, starting four months after the month of your balance date.
Provisional tax is offset against the following year's tax to pay and the result is either a refund, or final (also called terminal) tax. Terminal tax is usually payable on 7 April the following year.
If you are newly self employed or have become a partner in a partnership, you may be able to claim a discount on your first years tax by making early voluntary tax payments.

Companies and Trusts are subject to use of money interest on most terminal tax payments, so it is important to consider voluntary provisional tax payments in year one.
The number of provisional tax installments you have will depends upon the date on which you first started up in business.

If your provisional tax installments are paid late or are short paid, you will be charged a 5% late payment penalty if the unpaid amount exceeds $ 100. A further 1% late payment penalty is charged every month on any unpaid amount of tax and penalties until they are paid. As you can see, these rates are far in excess of trading bank rates.
The initial 5% penalty will be charged in two stages. The first 1% will be charged on the day immediately following the due date for payment. The remaining 4% will be charged if the tax remains unpaid seven days after the due date.
The message is simple. Have your bank finance your tax payments, not Inland Revenue.

If you are newly self employed or have just entered into a partnership (after 1 April 2005), you may be able to claim a 6.7% discount on your first years tax if you make a voluntary payment to Inland Revenue in that first year of business.
You have to make a voluntary payment before the end of your income year and you have to elect in your first year’s tax return that you want to claim the discount. The discount will be calculated on the lesser of the amount paid during the year or 105% your residual income tax liability.
There are a couple of other rules about who can claim the discount, but this may be worth considering so please do discuss it with us.

INDIVIDUALS
For income up to $ 38,000 19.5 cents in the dollar
For income over $ 38,000 and up to $ 60,000 33 cents in the dollar
For income over $ 60,000 39 cents in the dollar

NON-INDIVIDUALS
Companies 33 cents in the dollar
Trustee income 33 cents in the dollar

Be informed. Make sure you have a broad idea of the likely tax commitments in advance. If your income circumstances change, let us know. There will be provisional tax consequences. We can prepare a tax plan for you. Contact us if you have any queries