Provisional Tax

Example 1

2023 Tax Year = 1/4/22  31/3/23

Total 2023 RIT = $10,000

 Filing date = 31/3/24

 Payment date = 7/4/24

Provisional tax of 10,500 for 2024 tax year

 1/3: 28/8/23 = $3,333.33

 2/3: 15/1/24 = $3,333.33
 3/3: 7/5/24 = $3,333.33
o Safe inlet = UOMI begins 8/5/24 only

Example 2

2023 Tax Year = 1/4/22  31/3/23

Total 2023 RIT = $60,000

 Filing date = 31/3/24

 Payment date = 7/4/24

Provisional tax of $60,000 for 2023 year and $63,000 for 2024 year

2023 Tax year Prov tax

 1/3: 28/8/22 = $20,000

 2/3: 15/1/23 = $20,000
 3/3: 7/5/23 = $20,000

2024 Tax year prov tax

 1/3: 28/8/23 = $21,000

 2/3: 15/1/24 = $21,000
 3/3: 7/5/24 = $21,000

Tax Pooling

Client can eliminate UOMI and LPP buy using tax pooling. Can buy backdated tax so Tax pooling pays
the payment on the correct day. Client must pay tax pooling interest rate (less than UOMI)

How far back can you go? + 75 day rule

Foreign Investment Funds (FIF)
FIF Rules apply for a tax year if

1) NZ tax resident
2) Has attributing interest of $50k or more (cost price)
3) at any time during the year

Calculation 1: Fair Dividend Rate

- 5% of opening market value of shares is taxable income

- Dividends and capital gains not taxable
- Adjustment applies if FIF is bought + sold in the same tax year and a gain is made

Calculation 2: Comparative Value

- (Closing value + Gains) – (Opening Value + Costs)

o Gains include dividends +
o Costs include expenditure on buying FIFs + foreign income tax a person is liable for
in another country

Calculation 3: Deemed rate of return

- Average value = (Opening market value + Closing market value) / 2

- Deemed rate of return – prescribed by IRD
- Deemed income = Average value x Deemed rate of return
- Actual income = Actual income earned from FIFs
- Taxable income = Smallest value between Deemed income and actual income

Example 2:

- Opening value of foreign investment: NZD 100,000

- Closing value of foreign investment: NZD 80,000
- Deemed rate of return: 3%

Calculation

- Average value = (100,000 + 80,000) / 2 = NZD 90,000

- Deemed income = 90,000 * 3% = NZD 2,700
- Actual income received = NZD 1,500
- Taxable income = Minimum(2,700, 1,500) = NZD 1,500