Terminal Tax (Balance of Income Tax)
Terminal tax is the final income tax payment for the year, representing the difference between the total tax assessed in the IR4 return and provisional tax already paid. It is due after the income year has ended and the return has been filed. If provisional tax exceeds the final assessment, IRD issues a refund.
Who this applies to
- All companies that have filed or must file an IR4 and have residual income tax payable after credits
- Companies that overpaid provisional tax — terminal tax may be negative, triggering a refund
- Sole traders and partnerships with residual income tax after provisional tax credits
What to file
Terminal tax is a payment, not a separate return. The amount is calculated from the IR4 return: income tax assessed minus provisional tax paid minus any PAYE, RWT, or withholding tax credits.
How to file
Pay via myIR at my.ird.govt.nz, internet banking using the IRD payment slip reference, or via a registered tax agent.
Payment due
7 February (self-filing, standard balance date) or 7 April (tax agent clients, standard balance date).
Penalties for missing this deadline
Late payment penalty: 1% on the day after the due date, 4% seven days later. Use-of-money interest (UOMI) accrues at the prevailing rate from the due date on any unpaid terminal tax.
Filing checklist
- Confirm the IR4 has been filed and the final income tax assessment is available in myIR
- Total provisional tax paid across all three instalments from myIR records
- Calculate terminal tax: income tax per IR4 minus provisional tax paid minus any withholding tax credits
- Confirm payment deadline — 7 February (self-filing) or 7 April (tax agent)
- Arrange payment or confirm refund details with IRD if provisional tax exceeds the final assessment
Documents you'll need
- Filed IR4 showing the final income tax assessment for the year
- myIR records confirming all provisional tax instalments paid during the year
- RWT certificates or PAYE credit records if withholding tax credits are to be applied
Common mistakes to avoid
- Confusing the terminal tax due date (7 February for self-filers) with the IR4 filing due date (7 July) — they are different dates
- Forgetting to apply withholding tax (RWT) credits from interest income or dividends received, overstating the terminal tax payable
- Not anticipating a terminal tax liability and failing to set aside cash — terminal tax arrives approximately 10 months after year end, and the amount can be significant if provisional tax was underpaid
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