Image: Taxation (Kiwsaver, Student Loans, and Remedial Matters) Bill

TMNZ supports all but one of the proposed provisional tax amendments in the Taxation (Kiwisaver, Student Loans, and Remedial Matters) Bill.

We made a submission on the Bill last week after receiving feedback from clients.

In it, we share our thoughts on the following proposed amendments to provisional tax:

  1. Eliminating the requirement to estimate at the final instalment date for provisional tax.
  2. Clarifying the ‘lesser of’ calculation of interest for standard uplift taxpayers.
  3. Clarifying the application of late payment penalties applicable from the final provisional tax instalment date.
  4. Removing the ability for taxpayers to choose the provisional tax instalment to which a payment is applied.
  5. Clarifying the way in which provisional tax is truncated to whole dollars.
  6. Non-standard provisional tax instalments.

As well as that, we also ask IRD to address a possible gap in the legislation that it fails to mention in the Bill’s commentary.

This relates to IRD clarifying the amount on which it applies interest and late payment penalties when a third of actual is lower than the uplift payment at the second instalment.

The provisional tax changes in the Taxation (Kiwisaver, Student Loans, and Remedial Matters) Bill: Our view

It is TMNZ’s view that all but amendment 4 are positive for taxpayers.

Amendment 4 will result in taxpayers facing compounding interest and late payment penalties.

However, we believe IRD needs to provide greater clarification relating to amendment 3.

That’s because the commentary is not clear what happens for taxpayers in situations where the amount due at the final instalment is less than uplift and a third of actual.

Moreover, it is also our view that IRD applies amendment 5 retrospectively from the 2017-18 tax year.

You can read TMNZ’s full submission on the Taxation (Kiwisaver, Student Loans, and Remedial Matters) Bill here.