5 Tips for Provisional Tax
Are you due to pay provisional tax in August?
For many businesses, this will be their first instalment of provisional tax for the 2025 tax year. It’s important to stump up what you owe on this date. Inland Revenue (IR) won’t hesitate to charge steep interest and late payment penalties if you don’t.
If you’re a business owner or operator, here are five useful tips to ensure you’re ready to pay your August provisional tax.
1. Assess your cashflow
Now’s the time to look at the money coming in and going out of your business.
Cast your eyes over your accounts receivable report to see which customers owe you money. If required, ask them if they can sort their bill earlier. Conversely, see if you can buy more time if you owe suppliers money.
2. Set aside funds to make these payments
Your provisional tax equals your previous year’s residual income tax plus 5%.
Setting aside funds in a separate account can help you make these payments without the stress.
3. Review Income Estimates Regularly
Provisional tax payers should regularly review their income estimates to ensure they are not overpaying or underpaying their provisional tax.
If your income is lower than expected, contact us so we can re-estimate the payments.
4. Communicate with the IRD (and us)
Maintaining open communication with the Inland Revenue Department (IRD) can help avoid penalties and interest charges.
Let us know if you have made any arrangements with IRD.
5. Consider using Tax Pooling
If cash flow is tight, an IR-approved tax pooling intermediary like TMNZ can help. In some cases, using tax pooling and tax finance allows you to pay your provisional tax at a time and in a way that suits you, without incurring late payment penalties. You have the option to defer the full payment to a later date or pay in installments. While there is interest associated with these arrangements and they may not be suitable for every situation, we’re here to help.
If you want to learn more about deferring a specific provisional tax payment, please contact us to discuss whether using tax intermediaries might be beneficial for your situation.