Accounting Income Method (AIM) is a way to calculate provisional tax based on your real-time accounting profit, helping small businesses pay as they earn. If your accounting year’s annual turnover is under $5 million and you use approved accounting software, AIM could be for you. Payments are usually made every two months, keeping your tax in step with your cashflow. You won’t be able to use tax pooling if you pay your provisional tax on the Accounting Income Method.

A tax audit is a review by Inland Revenue to check that your business income tax returns or accounting systems are in line with tax laws. If errors are found, you may need to pay the difference, including interest or penalties. TMNZ can help reduce costs on all types of reassessed tax arising from tax audits and voluntary disclosures.

Your balance date marks the end of your financial year, when you close the books and wrap up your accounts, giving you an overview of your business’s financial performance. Most New Zealand businesses use 31 March, with the new financial year starting 1 April, but some industries use a different date. You can apply to change your balance date through Inland Revenue to align it with your natural business cycles.

You become a provisional taxpayer when your tax liability is more than $5,000. This usually happens if you earn income where no tax is deducted at source, like business, contracting or rental income. It means you’ll start paying your income tax in instalments during the year rather than in one lump sum payment at the end.

Calculating provisional tax means working out how much tax you owe for the income year. You can choose from four methods: standard uplift, estimation, GST ratio, or the Accounting Income Method (AIM), and each one affects how much you pay and when. It’s not always easy to get it right, but getting it wrong can impact your cashflow or lead to punitive interest and penalties — we’re here to help you avoid that. Book a call with one of our tax experts or download our free Calculating Provisional Tax Guide to learn more.

The estimation method lets you calculate provisional tax based on how much taxable income you expect to earn in the year ahead, giving you more flexibility than other options. It can be a smart choice if your income is likely to drop significantly from last year, but there are risks if you underpay your tax. If your final profit is higher than expected, you will incur IRD interest and possibly penalties, so it pays to be careful.

Inland Revenue offers individuals paying tax for the first time an early payment discount to encourage them to pay their provisional tax in their first year of business.

This discount is only available for individuals earning business income–either directly, through a partnership, or through a look-through company. It is claimed when you file your income tax return.

Flexitax® is TMNZ’s flexible, Inland Revenue-approved payment solution that lets you pay provisional or terminal tax in a way that works for your cashflow. Pay in full or in instalments — when it suits your financial position. It’s simple, stress-free, and much cheaper than incurring IRD interest and late payment penalties.

An extension of time (EOT) gives you more breathing room to file your tax return, usually until 31 March, the year after your balance date. It’s usually automatically granted if you’re linked to a registered tax agent. If you’re managing your own taxes and have a 31 March balance date, your deadline is 7 July.

The GST ratio method links your provisional tax to your GST sales, so your payments move in line with your cashflow. It’s available to businesses with turnover under $5 million, who file GST monthly or two-monthly, and who had less than $150,000 in income tax to pay last year. You’ll generally pay provisional tax at the same time as your GST.

A New Provisional Taxpayer is:
A business with Residual Income Tax (RIT) of $60,000 or more in the current year, where it hasn’t had income in the previous four years.
Or an individual with a RIT of $60,000 or more in the current year, where their RIT was $5,000 or less in the previous four years.
It’s important to note that new provisional taxpayers are subject to IRD Use of Money Interest (UOMI) from their first provisional tax instalment. The Safe Harbour rule does not apply to a New Provisional Taxpayer.

An open tax year is one where you can still make changes, including using tax pooling to optimise your tax payments position. You have up to 75 days after your terminal tax date to finalise payments through a tax pool. After that, the year is closed, and any adjustments require a reassessment by Inland Revenue.

Provisional tax is business income tax paid in instalments across the year, based on your expected profit, helping you avoid one big bill at year-end. If you paid more than $5,000 in income tax on your last return, you’ll likely need to pay provisional tax the following year. It applies to individuals, companies, and trusts, but figuring out the amount of tax to pay (and when) isn’t always straightforward — that’s where we come in. Tax pooling allows you to pay your provisional tax when it suits you, not when IRD tells you to.

Provisional tax is usually paid in three instalments throughout the year, on the 5th, 9th and 13th months of your financial year. The exact dates depend on your balance date and the method you use. For most taxpayers, those key dates are 28 August, 15 January, and 7 May. Knowing when to pay matters — miss a date, and IRD could charge you interest or penalties. Use our interactive provisional tax calendar to quickly see when your key dates are, depending on your balance date.

If you’re in business, residual income tax is the amount of income tax you owe for the year. If you are an individual with business, investment or rental income, it’s your tax liability after subtracting any PAYE and tax credits you’re entitled to (excluding Working for Families).

RIT is the figure Inland Revenue uses to determine if you need to pay provisional tax. This is the amount you’ll pay throughout the year via provisional tax or at year-end as terminal tax.

The safe harbour rule protects individual taxpayers from Inland Revenue interest charges if their residual income tax is under $60,000 and they use the standard uplift method. As long as the tax paid is in full and on time, IRD will only charge interest if there’s still tax owing at the terminal tax date. It’s a useful buffer, especially for those in their first year of business or with unpredictable income.

The standard uplift method is the most common way to calculate provisional tax based on a percentage of your previous year’s income tax. Typically, this means paying 105% of last year’s tax (or 110% if you’re using the year prior).

If you use the standard Uplift Method, you will not be exposed to UOMI until your third provisional tax date. Tax pooling can help to optimise your tax payments to minimise your exposure to UOMI.

A tax deposit is a payment made into TMNZ’s tax pool at Inland Revenue instead of directly to IR. These deposits are date-stamped, giving you the flexibility to transfer, refund, or apply them to a different tax year once you know your final liability. It’s a smart way to stay on track while keeping your tax payments as efficient and accurate as possible, and it offers you much more flexibility than paying IRD directly.

Tax Finance is TMNZ’s way of helping you delay provisional or terminal tax payments without facing IRD interest or late payment penalties. You lock in TMNZ’s competitive interest rate today, and pay your tax at a time that better suits your cashflow and financial position. It’s a smart, simple way of keeping cash in your business to invest where you need it most.

Tax Purchase is when you buy back-dated tax from TMNZ’s tax pool to settle what you owe to Inland Revenue — and it’s treated as if you paid on time. That means you can reduce IRD interest by up to 30% and wipe out late payment penalties. It’s a smart, cost-saving option if you’ve missed a provisional tax payment or received a reassessment.

The terminal tax date is your final deadline to pay any remaining income tax for the year. It usually falls in April or February, depending on your balance date and whether you have an extension of time through a tax agent. Missing it can trigger IRD interest and penalties — so it’s good to plan ahead or talk to us about flexible ways to pay.  If you use tax pooling, you can settle your tax liability up to 75 days after your terminal tax date. Use our interactive provisional tax calendar to quickly see when your terminal date is, or book a call with one of our tax experts to learn how we can get you an extension of time.

After you file your income tax return, Inland Revenue may advise that you have a Terminal Tax Liability–the final amount of tax owing after crediting any earlier tax payments.

While Inland Revenue may show this amount as due on your terminal tax date, interest (UOMI) begins to apply earlier if you’re not a Safe Harbour taxpayer, starting from your third provisional tax instalment.

By paying through TMNZ, you can reduce that interest cost by up to 30%.

Use of Money Interest (UOMI) is interest Inland Revenue charges when you underpay your income tax or pays you if you’ve overpaid. It starts the day after your tax was originally due and stops once your full balance (including interest) is settled. Inland Revenue deliberately sets a high interest rate for tax underpayments to encourage the timely payment of tax. Tax pooling with TMNZ is one of the smartest ways to significantly reduce or avoid UOMI and take control of how and when you pay your tax.

A voluntary disclosure is when you tell Inland Revenue about a mistake in your tax return before they find it themselves. It’s a smart way to reduce penalties and show you’re acting in good faith — even if the correction results in more money to pay. IRD will review the disclosure and decide if any further action is needed.