IRD will sometimes apply the 105 percent standard uplift calculation (CY-1) retrospectively when determining what’s due and payable at each provisional tax instalment.
This happens in situations where CY-1 payments turn out to be less than 110 percent uplift payments (CY-2).
When this is the case, IRD’s system will automatically overwrite the CY-2 calculation once a taxpayer files their return for the previous year.
It will apply what’s payable as per the CY-1 calculation to any earlier instalment(s) prior to the date of filing that return. See below.
|Example – uplift instalments for 2020 tax year|
A taxpayer with a 31 March balance date with the following information:
2018 RIT: $35,000
2019 RIT: $22,000 – accountant files the return for this year on 3 February 2020
The standard uplift payments due and payable for the 2020 tax year are as follows:
28 Aug 19: $7700
15 Jan 20: $7700
7 May 20: $7700
TMNZ’s Provisional Tax Calculator also applies this logic when taxpayers enter their RIT and filing date information.
As you can see, this benefits standard uplift taxpayers.
Legislative change to reflect this approach to standard uplift
IRD’s legal team feels the legislation is not clear in regards to overwriting CY-2 with CY-1 when the latter is lower. As such, there is an amendment in the Taxation (Kiwisaver, Student Loans, and Remedial Matters) Bill that will align the legislation with what the department is doing operationally.
The Bill is due to have its second reading.
Please feel free to contact TMNZ if you have any questions about this.
Be sure to download our free guide on calculating provisional tax using the standard uplift method if you haven’t done so.