Penalties and interest: Late payment penalties
When are late payment penalties charged?
If you don't pay your taxes and duties by their due date, you may have to pay late payment penalties.
Late payment penalties consist of:
- initial penalties, and
- monthly incremental penalties on any amounts that remain unpaid.
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 incremental 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 amounts of $100 or less.
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 that you will have more time to make the payment without incurring a late payment penalty. If you do not pay within the grace period, the late payment penalty will be imposed from the due date. Interest will still apply.
The amount of the penalty
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% incremental penalty will be added.
| Note | |
|---|---|
| Interest will be charged on amounts that are not paid by the due date, including penalties. | |
When penalties start
Late payment penalties start from the day after the due date for payment.
If the amount due is increased as a result of a reassessment, a new due date will generally be set for paying the newly assessed amount. There will be no late payment penalty imposed on the newly assessed amount if it's paid by the new due date.
Other penalties that affect Māori authorities
Additionally, if a Māori authority has a debit balance in its Māori authority credit account (MACA) at 31 March it will automatically incur a 10% penalty on that amount. The debit balance is referred to as further income tax due, and the penalty is a Māori authority distribution penalty tax.
Both further income tax and Māori authority distribution penalty tax are due by 20 June following the end of the MACA year.
| Note | |
|---|---|
| If your organisation stops being a Māori authority and a debit balance exists, you must clear that debit no later than the last day on which the organisation is still a Māori authority. If this amount is not paid by the due date, late payment penalties may apply. | |
Date published: 19 Feb 2009
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