Staying on top of your tax obligations is one of the simplest ways to avoid unnecessary costs for your business. However, we understand that deadlines can sometimes be missed, especially during busy periods.
Inland Revenue (IRD) applies penalties for both late payments and late filing, and these costs can add up quickly. Here's what you need to know.
Late Payment Penalties
If tax is not paid by the due date, IRD may apply a series of penalties.
Income Tax, GST, FBT and Withholding Tax
1% initial late payment penalty charged the day after the due date.
4% additional penalty charged if the tax (including penalties) remains unpaid seven days after the due date.
1% monthly incremental penalty may apply to older tax debts from the 2017 income year and earlier.
Exceptions
The 1% monthly incremental penalty no longer applies to:
GST debts for periods ending 31 March 2017 and later.
Income tax (including provisional tax) for the 2017–18 and later income years.
Working for Families Tax Credit overpayments for the 2017–18 and later income years.
Grace Period
If this is your first late payment within a two-year period, Inland Revenue may provide a grace period before applying certain penalties.
PAYE Non-Payment Penalties
PAYE has separate rules.
If PAYE is not paid by the due date:
A 10% penalty is charged immediately.
A further 10% penalty may be charged for each month the amount remains unpaid.
Late Filing Penalties for Income Tax Returns
The penalty for filing an income tax return late depends on your net income.
Net Income | Penalty |
|---|---|
Less than $100,000 | $50 |
$100,000 to $1 million | $250 |
More than $1 million | $500 |
Late Filing Penalties for Employment Information
If employment income information is filed late, Inland Revenue may charge a $250 late filing penalty.
In some cases, the penalty may be waived for a first-time default.
Late Filing Penalties for GST Returns
GST late filing penalties depend on the accounting basis your business uses.
Accounting Basis | Penalty |
|---|---|
Payments basis | $50 |
Hybrid or Invoice basis | $250 |
How to Avoid Penalties
The best way to avoid penalties is to stay organised and plan ahead.
Keep track of upcoming tax deadlines.
Set reminders for payment due dates.
Keep your records up to date throughout the year.
Seek advice early if you're unable to meet a deadline.
If you're experiencing cash flow challenges or anticipate difficulties meeting your tax obligations, it's important to act early. Inland Revenue may be able to work with you on a payment arrangement before penalties escalate.
Need Help?
At Evans & Co, we're here to help you stay compliant, minimise penalties, and take the stress out of managing your tax obligations.
Get in touch with our team today to discuss your situation before small issues become expensive ones.
