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Provisional tax helps you manage your income tax. You pay it in instalments during the year instead of a lump sum at the end of the year.

You'll have to pay provisional tax if you had to pay more than $5,000 tax at the end of the year from your last return. $2,500 before the 2020 return.

It's payable the following year after your tax return. For example, if your residual income tax from your 2023 return is more than $5,000, then you'll need to pay provisional tax during the 2024 tax year.

Provisional taxpayers often earn:

  • self-employed income
  • rental income
  • income earned as a contractor
  • income from a partnership
  • overseas income.

There are some situations where you may need to pay provisional tax on your reportable income.

These can be due to:

  • incorrect use of tax code or rate for PAYE, interest, or dividends
  • lump sum payments that did not have tax deducted, or not enough tax deducted
  • employee share scheme income that did not have tax deducted
  • property sales subject to the bright-line property rule.

In light of COVID-19 the provisional tax threshold has been increased from $2,500 to $5,000. This means any current provisional taxpayers with provisional tax payments of less than $5,000 will have until 7 February following the year they file to pay their tax bill. This is intended to lower compliance costs for smaller taxpayers and allow them to retain cash for longer.

Last updated: 28 Aug 2023
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