If your last income tax return resulted in a tax payment exceeding $5,000, you may be required to pay provisional tax for the following year. Provisional tax acts as progress payments on your upcoming income tax obligations.
The amount you need to pay is based on your expected profit for the year. Typically, it is calculated based on the tax liability from the previous year, known as residual income tax (RIT).
Even if provisional tax is not mandatory for you, you can choose to pay it to spread out your tax responsibilities throughout the year. This approach helps manage cash flow and alleviates the pressure of a lump-sum payment at year-end.
For new businesses, the initial provisional tax payment can be challenging. It involves paying both the previous year’s income tax and the first installment of next year’s provisional tax simultaneously. Fortunately, there are ways we can assist in easing this burden.
If you are self-employed or a partner in a partnership, you may qualify for a 6.7% discount on your first year’s income tax. This incentive encourages early tax payment and provides financial relief before provisional tax becomes due for the first time.
Specific considerations apply to tax relief measures aimed at assisting businesses affected by COVID-19:
– The residual income tax (RIT) threshold for provisional tax is now $5,000, effective from the 2020-21 tax year.
– If your business continues to experience COVID-19-related challenges and your income falls short of the initial estimate, you may be eligible for early refunds by re-estimating your provisional tax.
– In cases where you are unable to meet tax payment deadlines, the Inland Revenue has the authority to waive penalties and interest. You may also qualify for a use of money interest (UOMI) write-off.
It is crucial to keep your tax plan up to date. If circumstances change within your business, adjustments to your plan may be necessary. Please keep us informed about your business’s situation so that we can provide appropriate guidance.
Stay proactive in managing your tax obligations. Contact us today to discuss your business’s specific needs and ensure compliance with tax regulations.
Your Outside Team
Need a bit of assistance with your
business? Contact an Outside Accounting team member today and learn more about
our fixed fees. You won’t regret it.
Aside from business consultation, we
are business accountants Wellington
who offer accounting, bookkeeping, payroll services designed to
help you achieve greater financial success.
You can click here to speak to a business, accounting and bookkeeping firm. We will give you a
call to know more about your needs. We will explain to you how we can improve
your business.
Address: Level 2, 182 Vivian Street,
Te Aro, Wellington 6011, New Zealand
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975
Hiring a reliable tradesperson may seem straightforward, but finding the right fit takes careful planning. You want to ensure you’re confident in your decision, and the tradesperson feels capable of meeting your expectations. Effective research and clear communication are crucial for making this happen.
In today’s fast-paced business environment, making the right decisions is critical for achieving sustained growth and success. At Outside Accounting, we’ve seen firsthand how businesses can thrive when they avoid common pitfalls. Here are three major business mistakes and actionable tips to help you stay on the right path:
Evaluating a franchise opportunity requires careful analysis of various factors to ensure long-term success. Here are 11 essential points to consider before purchasing a franchise:
Steering a small business through economic downturns can be challenging, but these moments also present opportunities for growth, innovation, and strategic change. Deciding whether to pivot, grow, or leave the business depends on factors such as market conditions, financial stability, and personal aspirations. Here’s a guide to help you navigate tough times:
As a business owner, reviewing your financial reports each month is essential for maintaining control and steering your business in the right direction. Here are six key reasons why you should prioritize this important task.
Starting your own business is exciting, but handling all the financial details can be overwhelming. Instead of spending your time managing the books, you could focus on growing your business. This is where expert accounting firms like Outside Accounting step in.
ALL POSTS
NEWSLETTER SUBSCRIPTION