Calculation options
You can calculate your provisional tax payment using the:
Calculate your provisional tax using the standard option
To calculate:
- 2009 provisional tax (instalments payable on or after 1 April 2009), and
- 2010 provisional tax (all instalments)
your provisional tax is the same as the previous tax year's residual income tax.
To calculate your provisional tax for 2011 and beyond, add 5% to the previous tax year's residual income tax.
Reduction in tax rates
There has been a change in the rates of personal income tax from the 2009 tax year. The change in tax rates temporarily affects how you calculate your provisional tax instalments. The standard option of calculating provisional tax for the 2009 year (instalments payable on or after 1 April 2009) and 2010 year (all instalments) is the residual income tax (RIT) for the immediately preceding income year minus $730.00.
Note
If your RIT minus $730.00 is $2,500 or less you do not need to pay provisional tax for that year.
See the table below for details:
| Year for provisional tax being calculated | Year of RIT amount used | Adjustment |
|---|---|---|
| 2009 (instalments payable on or after 1 April 2009) | 2007 | RIT - $730 + 5% |
| 2008 | RIT - $730 | |
| 2010 | 2008 | RIT - $1,460 + 5% |
| 2009 | RIT - $730 | |
| 2011 | 2009 (back to original calculation) | RIT + 10% |
| 2010 (back to original calculation) | RIT + 5% |
Important
- Changes in the tax rates may have an effect on the calculation of your provisional tax.
- The Taxation (KiwiSaver and Company Tax Rate Amendments) Act 2007 reduces the company tax rate from 33% to 30% with application from 2009 and subsequent tax years. As part of these changes the above Act introduces new sections RZ 3 to RZ 5 which provides transitional provisions for calculating provisional tax for the 2009 and 2010 tax years to take into account the reduced tax rate. For companies these are as follows:
| Year for provisional tax being calculated | Year of RIT amount used | Adjustment |
|---|---|---|
| 2009 (instalments payable on or after 1 April 2009) | 2007 | 95% of RIT |
| 2008 | 90% of RIT | |
| 2010 | 2008 | 95% of RIT |
| 2009 | RIT (no adjustment) | |
| 2011 and onward | Two years previous | RIT + 10% |
| Previous year | RIT + 5% |
Note
We automatically use the standard option to charge provisional tax unless you choose the estimation or ratio option.
Please see our Provisional tax guide (IR289) under Forms and guides for more information.
Calculate your provisional tax using the estimation option
To calculate your provisional tax using the estimation option, estimate what your residual income tax for the tax year will be. To do this, you:
- add up all your estimated income
- work out the tax on the total, then
- subtract any tax credits (like PAYE).
You can estimate your provisional tax as many times as necessary up to and including your last payment due date for the tax year. Each estimate must be fair and reasonable.
Note
You may estimate using the following rates for the 2008-09 tax year if you are taxed at the individual rates:
| Income range | Annual tax rate applied |
|---|---|
|
$0 - $14,000
|
12.5%
|
|
$14,001 - $48,000
|
21%
|
|
$48,001 - $70,000
|
33%
|
|
$70,001 and higher
|
38%
|
Important
If your estimated residual income tax is lower than your actual residual income tax for that tax year, you may be liable for interest on the underpaid amount.
Calculate your provisional tax using the ratio option
To calculate your provisional tax using the ratio option, you multiply your ratio by your total GST taxable supplies for:
- the two-month period if you file your GST return two-monthly, or
- for two GST return periods if you file your GST return one-monthly.
There has been a change in the rates of personal income tax from the 2009 tax year. The change in tax rates temporarily affects how your ratio percentage is calculated.
See the table below for details:
| Year | RIT previous year | RIT two years previous |
|---|---|---|
| 2009 | (2008 RIT - $730) (2008 taxable supplies - asset adjustments) x 100 |
(2007 RIT - $730) (2007 taxable supplies - asset adjustments) x 100 |
| 2010 | (2009 RIT - $730) (2009 taxable supplies - asset adjustments) x 100 |
(2008 RIT - $1,460) (2008 taxable supplies - asset adjustments) x 100 |
| 2011 | (2010 RIT (original formula)) (2010 taxable supplies - asset adjustments) x 100 |
(2009 RIT (original formula)) (2009 taxable supplies - asset adjustments) x 100 |
If your business's income is taxed at the company rate the ratio percentage is calculated as follows:
| Year | RIT previous year |
|---|---|
| 2009 | 2008 RIT x 90 (2008 taxable supplies - asset adjustments) |
| 2010 | 2009 RIT (2009 taxable supplies - asset adjustments) |
| 2011 | 2010 RIT (2010 taxable supplies - asset adjustments) |
Example: Calculating provisional tax - the ratio option using individual rates
Angela sells second-hand computers over the internet and meets all the criteria to qualify for the ratio option. Angela is a two-monthly GST payer and decides that she wants to base her provisional tax on her GST taxable supplies starting in the 2009-10 tax year.
The Commissioner advises Angela that her ratio percentage is 8%. This is calculated from her residual income tax and taxable supplies figures for the 2008-09 tax year. Her residual income tax figure for that year was $20,730 and her taxable supplies figure was $250,000. The residual income tax figure minus $730 (as a result of the tax rate reduction) is divided by the taxable supplies figure and multiplied by 100 to express the result as a percentage:
$20,730 minus $730 divided by $250,000 x 100 = 8%
The ratio percentage is 8%.
Angela must apply the ratio to each of her GST period's taxable supplies to determine the amount of the provisional tax instalment. Angela's taxable supplies for her first GST period amount to $13,000 and her provisional tax liability for that period will be $1,040 (13,000 x 8% = 1,040). The same formula must be used to calculate her provisional tax instalment for the other five GST periods.
Find out more
Next steps
Date published: 31 Mar 2009
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