Changes to IRD penalties and interest
The safe harbour threshold basically means if you have paid tax on the standard uplift method of paying provisional tax (last year’s tax bill + 5%) and your tax bill is less than $60,000, you won’t be pinged for interest if you haven’t paid enough tax.
If your annual tax bill is over $60,000, and you pay the first two provisional tax payments based on the standard uplift method but have underpaid your tax, use of money interest will only apply from the 3rd instalment. This is a great improvement! It’s pretty clear that there a lot of people and businesses who have about as much chance of accurately forecasting profit as of picking next week’s lotto numbers. And now IRD has recognised this fact and has put in place this new system to help us all keep on top of our tax more accurately.
So what does this means for you? Prior to the 3rd provisional tax payment we can look at your full year’s trading and determine how much tax to pay at that stage. If the timing doesn’t work for you, we can discuss Tax Pooling which involves purchasing tax when it suits you – you can buy anything these days… even tax!
The IRD is also going to be removing the 1% incremental late payment penalties from provisional tax, income tax and GST periods after the 24th of March 2017 – even more great news for us all!
Give us a call or drop us an email any time if you want to know more. Advice and help is what we do best.