Skip to Content


Understanding provisional tax

What is provisional tax?

Provisional tax is a series of instalments of income tax for the tax year. You are assessed for provisional tax if your residual income tax (RIT) liability is more than $2,500.

Changes to provisional tax

From the start of the 2008/09 tax year (if you have a 31 March balance date, this will be 1 April 2008), provisional tax must be paid in combination with your GST payment. This means that:

  • the due dates for provisional tax payments have changed, and
  • you must calculate provisional tax at the same time as your GST on a combined GST and provisional tax return.

You also have the option of choosing to use the "ratio option" to calculate your provisional tax. 

Paying your provisional tax

The table below explains when you must pay provisional tax depending on your taxable period.

If your taxable period for GST is... then you must pay provisional tax on...

two-monthly

your 2nd, 4th and 6th GST return for the year.

one-monthly

your 4th, 8th and 12th GST return for the year.

six-monthly

every GST return.


Note
  • Voluntary payments of provisional tax can be made at any time.
  • If you are required to make a provisional tax payment for a period, you will need to combine this with your GST payment and make one payment to us.

    If you have a GST refund, you can elect to offset the amount against your provisional tax due for the same instalment date. If we then reassess your GST refund and as a result you have provisional tax to pay, we will give you 30 days after we issue the notice of reassessment to make a payment before any late payment penalties apply.

Example 1: Two-monthly GST payments

Mark is a panel beater who pays GST two-monthly. Mark's GST taxable periods end on the last day of January, March, May, July, September and November. His income tax balance date is 31 March.

Mark's annual tax payment dates are:

  • 28 June - GST payment
  • 28 August - GST payment and compulsory provisional tax payment
  • 28 October - GST payment
  • 15 January (as 28 December is over the Christmas period) - GST payment and compulsory provisional tax payment
  • 28 February - GST payment
  • 7 May - GST payment and compulsory provisional tax payment

Example 2: Six-monthly GST payments

John is a builder whose taxable supplies are under $250,000 and therefore he pays GST on a six-monthly basis. His income tax balance date is 31 March.

John's annual tax payments are:

  • 28 October - GST payment and compulsory provisional tax payment
  • 7 May - GST payment and compulsory provisional tax payment

Use-of-money interest on provisional tax

If you are liable to use-of-money interest on provisional tax payments, then your compulsory provisional tax payments will be subject to use-of-money interest.

If you make voluntary provisional tax payments, you will receive use-of-money interest from the day after the date of payment, even if you make the voluntary payment before your first compulsory provisional tax payment date.

Find out more

Next steps

 


Date published: 30 Sep 2008

Back to top