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 $2,500 tax at the end of the year from your last return.
It's payable the following year after your tax return. For example, if your residual income tax from your 2019 return is more than $2,500, then you'll need to pay provisional tax during the 2020 tax year.
Provisional taxpayers often earn:
- self employed income
- rental income
- income earned as a contractor
- income from a partnership
- overseas income.