Provisional Tax Instalments
Provisional tax is the mechanism by which income tax is paid during the income year rather than as a lump sum after filing. It applies where the prior year's residual income tax (RIT) exceeded NZD 5,000. Three equal instalments are due across the year using the standard method: each equal to one-third of 105% of the prior year's RIT.
Who this applies to
- Companies and individuals whose prior year residual income tax (RIT) exceeded NZD 5,000
- New businesses estimating their first-year income tax liability will exceed NZD 5,000
- Taxpayers using the standard method (105% of prior year RIT) or the estimation method
What to file
Provisional tax is a payment obligation, not a separate return. Payments are made via myIR and tracked against the income year's final tax assessment.
How to file
Pay via myIR at my.ird.govt.nz, internet banking using IRD payment codes, or via a registered tax agent. The amount is pre-calculated by IRD based on the prior year's RIT.
Payment due
Three instalments: 28 August (first), 15 January (second), 7 May (third). Each instalment = one-third of 105% of the prior year's RIT under the standard method.
Penalties for missing this deadline
No separate late filing penalty for provisional tax. However, use-of-money interest (UOMI) accrues on unpaid instalments from the due date at approximately 8.35% p.a. (2025/26 rate). A late payment penalty of 1% applies on the day after the due date, plus a further 4% seven days later.
Filing checklist
- Confirm prior year residual income tax (RIT) to determine whether provisional tax applies (threshold: NZD 5,000)
- Calculate standard instalment amount: prior year RIT x 105% / 3
- Set calendar reminders for all three due dates (28 August, 15 January, 7 May)
- Consider whether the estimation method would be more accurate if current year income differs significantly from last year
- Check safe harbour eligibility: if prior year RIT was under NZD 60,000, paying standard instalments on time avoids UOMI even if the final liability is higher
Documents you'll need
- Prior year IR4 or IR3 showing residual income tax (RIT)
- myIR account access to confirm pre-calculated instalment amounts and payment references
Common mistakes to avoid
- Missing the first instalment on 28 August — this is the most commonly missed date as it falls in the middle of the tax year
- Underestimating using the estimation method and incurring UOMI on the shortfall
- Not checking whether the safe harbour threshold (prior year RIT under NZD 60,000) applies, and needlessly switching to the estimation method
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