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How penalties are calculated

We may charge late payment penalties on overdue amounts.

Late payment penalties include:

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

If you file your Employer monthly schedule (IR348) or Employment information schedule but don't pay the amount, we may charge non-payment penalties.

How we work out penalties

Initial late payment penalties are applied in two stages:

  • An initial 1% penalty may be charged on the day after the due date.
  • A further 4% penalty may be charged if there is still unpaid tax (including penalties) at the end of the 7th day from the due date.

We may add a further 1% penalty every month the amount remains unpaid.

We don't charge late payment penalties on:

  • unpaid tax of $100 or less
  • student loan payments, and
  • child support payments.
We charge interest on amounts not paid by the due date, including penalties.

Monthly penalty no longer charged on some accounts

We no longer charge the 1% monthly penalty on unpaid amounts for:

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

We'll still charge the initial 1% and 4% penalties.

We'll continue to charge the 1% monthly penalty on unpaid amounts before the dates above.

When penalties start

Late payment penalties start from the day after the payment due date. For a reassessment, a new due date will generally be set. There will be no late payment penalties on the newly assessed tax if it's paid by the new due date.

Grace period

If it’s your first late payment in a two-year period, we may give you extra time before we charge late payment penalties. This is called a grace period.

We’ll notify you if you have a grace period and what the new due date for payment is. If you don't pay by this date then the late payment penalties are imposed from the original due date.

We will charge interest from the original due date.

Penalties that only affect Māori authorities

If a Maori 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.

Further income tax and Māori authority distribution penalty tax are due by 20 June following the end of the MACA year.

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 a Māori authority. If this amount isn’t paid by the due date, late payment penalties may apply.