Provisional tax rules and tax pooling

What you need to know about the new provisional tax rules and tax pooling:

New provisional tax rules for taxpayers using the standard method to calculate their payments take effect from next month and will apply from the 2018 tax year.

Here’s a summary of what you need to know:

Smaller taxpayers

The biggest change applies to smaller taxpayers (individuals, companies and trusts) using what IRD calls the ‘safe harbour’.


  • Your actual income tax liability is less than $60,000 and…
  • You paid the amounts of tax required as per the standard method at your three provisional tax dates for that year.


  • You will not be charged IRD interest if you did not pay enough provisional tax, provided any final balance is paid by your terminal tax date.

Previously the safe harbour threshold was $50,000 and applied to individuals only.

Medium and large taxpayers

The second change affects other taxpayers.


  • Your actual income tax liability is $60,000 or more and…
  • You paid provisional tax for that year based on the standard method.


  • You will not be charged IRD interest if you paid the amounts of tax due as per the standard method at your first and second provisional tax dates for that year, even if your actual liability is higher.
  • The final balance will be due at your third provisional tax date. IRD interest applies on any underpayment of tax from the third provisional tax date.

Please remember
These changes apply only to those who use the standard method to pay provisional tax. Taxpayers using the estimation or GST ratio method will face the same rules as before.

You will be charged IRD interest and late payment penalties if you do not make your payments on the dates they are due.

The advantages of tax pooling

Tax Management NZ (TMNZ) is an IRD-approved tax pooling intermediary that can provide greater flexibility over how and when you make your missed, underpaid or upcoming provisional tax payments for the current tax year or one just completed.

Settling what you owe through TMNZ as opposed to directly with IRD can eliminate late payment penalties and reduce interest costs by up to 30 percent.

TMNZ also provides you with more time to pay (up to 75 days past your terminal tax date).

How it works?

TMNZ pays tax into its tax pool account at IRD on each provisional tax date and these payments are date-stamped.

When you pay through TMNZ, it arranges the provisional tax you require to be transferred from its tax pool to your IRD account.

IRD treats the tax as if it was paid on the original date it was due once it processes this transfer, wiping any interest and late payment penalties owing.

Is this service legal?

Yes, TMNZ is registered with IRD and operates under legislation set out in the Income Tax Act 2007 and Tax Administration Act 1994.

The bank accounts into which you make your payments are administered an independent trustee. This independent trustee also oversees TMNZ’s tax pool account at IRD.


Please contact us for more information about TMNZ