new zealand dollars banknotes coins white background v3

Forgot to pay your tax? We may be able to save you $$$

Feb 12, 2021 / 1 minute read
Categories

It is important to pay your income tax and provisional tax payments on time. Taxpayers who have an annual tax bill, before payment of provisional tax, of less than $60,000, generally, do not incur interest on their end of year tax liability as long as it is paid by the taxpayer’s terminal tax date (generally, 7 April of the following year).

However, this concession only applies if all of a taxpayer’s provisional tax payments are paid in full and on time. If your tax is not paid by the due date you will be exposed to:

  • a 1% penalty on the amount of unpaid tax if one day late
  • a 4% penalty on the amount of unpaid tax if one week late
  • interest on the unpaid amount until paid (current rate is 7.00% per annum); BUT
  • more importantly, interest is payable on the end of year payment from the final provisional tax instalment date until the tax is paid.

The interest charge on the end of year tax liability from the final provisional tax instalment date until the tax is paid applies even if the provisional tax is subsequently paid in full.

We have had a situation where a taxpayer had a final tax bill of approximately $40,000. Generally, they would not be liable for interest on this amount but in this case they paid one of their provisional instalments one day late. Not paying on time meant they were liable for interest on the $40,000 at a rate of 8.35% (the then interest rate) from their final provisional tax date until it was paid.

However, there are ways around this. If you find you have missed a provisional tax payment, contact us before making payment. We can organise for you to purchase tax through a tax pooling intermediary so as from Inland Revenue’s perspective it appears as though the tax payment has been made on time.  This will eliminate late payment penalties and interest being charged from the final provisional tax instalment date, as well as reducing the amount of interest charged on the late payment. This may save you a lot of money!

CraigM

Craig McCallum

Associate

Craig is an expert in reviewing and analysing client’s financial statements and tax returns and provides specialist taxation advice, you can always expect Craig to have his finger on the taxation pulse.

  • Rural
Next Up

Thinking of going contract milking next season?

Nov 11, 2024 / 2 minutes read