Section RC 5 — Income Tax Act 2007: Methods for calculating provisional tax liability

RC 5 Methods for calculating provisional tax liability Choice of method (1) A person liable to pay provisional tax must calculate the amount payable for a tax year using 1 of the methods described in subsections (2) to (7). Standard method: 5% uplift (2) Under the standard method, the amount of provisional tax payable for the tax year is 105% of the person’s residual income tax for the preceding tax year, determined under section RC 6 . Subsection (3) overrides this subsection. Standard method: 10% uplift (3) Despite subsection (2), the amount of provisional tax payable for the tax year is 110% of the person’s residual income tax for the tax year before the preceding tax year if— (a) they are required to provide a return of income for the preceding tax year; and (b) the return is not due on or before the date on which the first payment of provisional tax for the tax year is required through the application of section 37 of the Tax Administration Act 1994, or an extension granted under that section; and (c) they have not provided the return on or before that date; and (d) the date is not the date of instalment F for the corresponding income year. Relationships and modification of standard method (4) Subsections (5) to (7) override subsection (3). Sections RZ 3 (Standard method: 2010–11 to 2012–13 income years) and RZ 5D (Standard method or GST method: transition for Maori authorities) modify subsections (2) and (3). Estimation method (5) The person may estimate their provisional tax liability for the tax year under section RC 7 . GST ratio method (6) A person who is eligible under section RC 16 and not excluded by section RC 17 may choose to use a goods and services tax (GST) ratio under section RC 8 to determine their provisional tax liability for the tax year. Commissioner’s determination (7) If the Commissioner determines a person’s provisional tax liability under section 119 of the Tax Administration Act 1994, the amount or liability is that last determined by the Commissioner and notified to the person at least 30 days before the instalment date. The 30-day requirement does not apply in a case to which section 119(1)(d) of that Act applies (which relates to an estimate of residual income tax that is not fair and reasonable). Life insurance business (8) A person who carries on a business of providing life insurance and who is liable for income tax under the life insurance rules, must at the time they determine their provisional tax liability provide the Commissioner with details of the calculation of that liability. In particular, they must detail the extent to which the amount of provisional tax relates to the policyholder base. Defined in this Act: amount , business , Commissioner , corresponding income year , GST ratio , income tax , instalment date , life insurance , life insurance rules , notify , pay , policyholder base , provisional tax , residual income tax , return of income , tax year , Compare: 2004 No 35 s MB 4 Section RC 5(4): amended (with effect on 1 October 2010), on 21 December 2010, by section 121 of the Taxation (GST and Remedial Matters) Act 2010 (2010, No 130). Section RC 5(4): amended, on 1 October 2010, by section 25 of the Taxation (Budget Measures) Act 2010 (2010 No 27). Section RC 5(4): amended, on 1 October 2008, by section 39 of the Taxation (Personal Tax Cuts, Annual Rates, and Remedial Matters) Act 2008 (2008 No 36).