120KD Provisional tax instalments in transitional years

(1)

For a transitional year to which Schedule 3, Part B of the Income Tax Act 2007 applies, the residual income tax of a provisional taxpayer, other than a person to whom section 120KE(1) or (3) applies, is due and payable as determined under sections RC 21 to RC 24 of the Income Tax Act 2007.

(1B)

This section does not apply to a person that section 120KBB applies to, unless the person is a new provisional taxpayer.

(2)

A provisional taxpayer in a transitional year is liable for use of money interest for unpaid tax in relation to the instalments of provisional tax payable in the months set out in Schedule 3, Part B of the Income Tax Act 2007. The date interest starts is the day after the day on which payment of the instalment is due under section RC 21 of that Act.

(3)

For the purposes of calculating the amount of interest due in relation to an instalment of provisional tax other than a final instalment, the amount of residual income tax payable on the instalment date is calculated using the formula—

residual income tax × instalment period ÷ months in transitional year.

(4)

In the formula, the instalment period is either—

(a)

4, for provisional taxpayers who pay on the equivalent of instalment dates B, D, and F; or

(b)

6, for provisional taxpayers who pay on the equivalent of instalment dates C and F.

(5)

For the purposes of calculating the amount of interest due in relation to a final instalment of provisional tax, the amount of residual income tax payable is the residual income tax for the tax year minus any amount treated as due on an instalment date referred to in subsection (3).

(6)

In this section, a provisional taxpayer includes a new provisional taxpayer.

Example
Section 120KE

Dr Beige starts the income year (March balance date) using a GST ratio to determine the amount of provisional tax payable. He makes payments in June and August. On 10 September 2007, Dr Beige decides to change his determination method. He must then estimate his residual income tax for the income year (s MB 17(5) Income Tax Act 2004), and pay 2 instalments under the estimation method on instalment dates D and F (s MB 6(5) of that Act). Dr Beige provides a return for the income year that shows residual income tax of $30,000.

Four interest start dates apply:

  • for credit interest, the interest start date is 11 September 2007 (s 120KE(6)):

  • for debit interest, the interest start dates are:

    • 11 September for unpaid instalments under the GST ratio method (s 120KE(7))

    • 16 January 2008 for unpaid instalments under estimation method (s 120C(1)(a)(i)(A))

    • 8 May 2008 for unpaid instalments under estimation method (s 120C(1)(a)(i)(A)).

Figure illustrating example above

Files return for year and RIT is $30,000

Balance is $25,500 ($30,000 − $4,500)

Estimation instalments: interest calculated on unpaid tax of:

on 16 Jan 2008 on $9,750 ($12,750 − $3,000) (s 120C(2)(b))

on 8 May 2008 on $9,750 ($12,750 − $3,000) (s 120C(2)(b)).

Section 120KD: inserted, on 1 October 2007 (applying for income years corresponding to 2008–09 and subsequent tax years), by section 243(1) of the Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Act 2006 (2006 No 3).

Section 120KD(1): amended, on 1 April 2008 (effective for 2008–09 income year and later income years, unless the context requires otherwise), by section ZA 2 of the Income Tax Act 2007 (2007 No 97).

Section 120KD(1): amended (with effect on 1 October 2007), on 19 December 2007 (applying for 2008–09 and later income years), by section 238(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section 120KD(1B): inserted, on 1 April 2018 (applying for the 2017–18 and later income years), by section 346(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section 120KD(1B): amended, on 1 April 2018 (applying for the 2018–19 and later income years), by section 347(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).

Section 120KD(2): amended, on 1 April 2008 (effective for 2008–09 income year and later income years, unless the context requires otherwise), by section ZA 2 of the Income Tax Act 2007 (2007 No 97).

Section 120KD(2): amended (with effect on 1 October 2007), on 19 December 2007 (applying for 2008–09 and later income years), by section 238(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).

Section 120KD example: replaced, on 1 October 2007 (applying for 2008–09 and later income years), by section 197(1) of the Taxation (Savings Investment and Miscellaneous Provisions) Act 2006 (2006 No 81).

Section 120KD example heading: replaced (with effect on 1 October 2007), on 19 December 2007, by section 239 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).