NZ Provisional Tax Thresholds and Due Dates

Provisional tax is how self-employed people, businesses, and those with non-PAYE income pay tax throughout the year rather than in a lump sum at year-end. You must pay provisional tax if your residual income tax (RIT) for the previous year was more than $5,000.

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Who Must Pay Provisional Tax

Situation	Provisional Tax?
Previous year's RIT was over $5,000	Yes, compulsory
Previous year's RIT was $5,000 or less	No, but can opt in voluntarily
First year of business/self-employment	No in year 1, yes if RIT exceeded $5,000
Companies and trusts	Yes, if RIT over $5,000

Three Provisional Tax Methods

Method	How It Works	Best For
Standard method	Last year's RIT plus 5% (or 10% if 2 years old)	Businesses with stable/growing income
Estimation method	Estimate current year's RIT and pay in 3 instalments	Businesses with falling income or significant changes
AIM (Accounting Income Method)	Pay based on actual profit each 2 months via approved software	Small businesses with fluctuating income
Ratio method	Pay based on GST turnover ratio	GST-registered businesses with steady GST filings

Due Dates (31 March Balance Date, Standard Method)

Instalment	Due Date	Amount
1st instalment (P1)	28 August	One third of annual provisional tax
2nd instalment (P2)	15 January	One third of annual provisional tax
3rd instalment (P3)	7 May (following year)	One third of annual provisional tax
Terminal tax	7 February (or 7 April with tax agent)	Balance of tax owed after provisional paid

Due dates vary for non-March balance dates. GST-registered businesses on 6-monthly filing have 2 provisional tax payments per year instead of 3.

Use of Money Interest (UOMI)

UOMI is charged when you underpay provisional tax and credited when you overpay. Rates are reset by IRD periodically based on market interest rates.

UOMI Rate	Current Rate (from April 2026)
Underpayment rate (charged to taxpayer)	10.88%
Overpayment rate (credited to taxpayer)	4.30%

UOMI is deductible for income tax purposes if incurred in earning assessable income. The rates were last adjusted on 16 January 2025 and again periodically thereafter. Always verify current rates on the IRD website.

Safe Harbour Rules

If your previous year's RIT was under $60,000, you can use the safe harbour to avoid UOMI on underpayments, provided you pay the standard method amount by each instalment date.

Situation	Safe Harbour Applies?
Previous year's RIT under $60,000 and standard method used	Yes, no UOMI on underpayment if fully paid by P3
Previous year's RIT $60,000 or more	No, UOMI applies to any underpayment from P1
Using estimation method	No, UOMI applies if estimate is too low

Penalties for Late Payment

Type	Rate
Initial late payment penalty	1% of unpaid amount
Further late payment penalty (after 7 days)	4% of unpaid amount
Incremental penalty (every month thereafter)	1% per month
Maximum initial/further penalty combined	5% of unpaid amount

Tax Pooling

Tax pooling allows you to trade provisional tax payments with other taxpayers through an IRD-approved intermediary. This can reduce UOMI charges significantly if you've underpaid.

Benefit	Detail
UOMI savings	Typically 1 to 2% below IRD's UOMI rate
Deadline to purchase	Up to 75 days after terminal tax date
Approved intermediaries	Tax Management NZ (TMNZ), Tax Traders, others