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How penalties are calculated

If you don't pay your taxes and duties by the relevant due dates, you may have to pay late payment penalties.

Late payment penalties consist of:

  • initial penalties for paying tax late, and
  • monthly penalties on any amounts that remain unpaid.

If you file your employer monthly schedule but do not pay the amount calculated, you may also have to pay non-payment penalties.

How the penalties are calculated

The initial late payment penalties are calculated on the amount of tax that was paid late or that remains unpaid. The monthly penalties are calculated on the amount of outstanding tax plus the initial late payment penalties that were imposed.

Late payment penalties are not charged on unpaid tax of $100 or less. These penalties also don't apply to student loan or child support payments.

The non-payment penalty is calculated on the amount not paid when you file your employer monthly schedule.

Amount of the penalty

All initial late payment penalties are applied in two stages:

  • an initial 1% late payment penalty will be charged on the day after the due date
  • a further 4% penalty will be charged if there is still an amount of unpaid tax (including penalties) at the end of the 7th day from the due date.

Every month the amount owing remains unpaid, a further 1% monthly penalty will be added.

Interest will be charged on amounts not paid by the due date, including penalties.

1% monthly penalty

The 1% monthly penalty is no longer being charged on amounts that remain unpaid for:

  • GST return periods ending 31 March 2017 onwards
  • income tax including provisional tax for the 2018 income year onwards
  • Working for Families Tax Credits debit assessments for the 2018 income year onwards.

The initial penalty of 1% and the further 4% will still be charged on these periods.

Any amounts of unpaid tax for periods before the dates above will still continue to have the 1% monthly penalty charged.

When penalties start

Late payment penalties start from the day after the due date for payment. If the tax due is increased as the result of a reassessment, a new due date will generally be set for paying the newly assessed tax. There will be no late payment penalty imposed on the newly assessed tax if it's paid by the new due date.

Grace period

If this is your first late payment in a two-year period, (being the later of 1 April 2008 and the day 2 years before the default date and ending before the default date), you will be allowed a grace period which means you will have more time to make the payment. If you do not pay the late payment penalty is imposed from the due date. Interest will still apply.

Interest will be charged from the original due date.