Provisional tax payers will be very happy with the latest changes that Inland Revenue has made.

Provisional tax is designed to help payers spread the load of income tax by splitting the payments into three instalments spaced evenly throughout the year, rather than making one large payment at the end of the year. The total amount you pay (split into three equal payments) is based on your income from the year prior. Under the old rules, if your company or trust income had increased from the year prior but your provisional tax payments did not take this into account, Inland Revenue would charge you interest (at a rate called the Use of Money Interest Rate) on each provisional payment.

Under the new rule, if your company, trust or individual taxable income (and therefore your tax liability) increases during the year, you will not pay interest (at the Use of Money Interest Rate) on this difference provided it is less than $60,000 in tax.

This area of tax accounting can be complicated and is subject to ongoing change. If you would like to talk to a tax specialist please call Annika Dickey, Cliff Whitelaw, Paul Young or Wayne Weber on 407 7117.