IR9 Question 20 Initial provisional tax liability

An organisation has an initial provisional tax liability for a tax year if it:

starts to derive income from a taxable activity in the tax year, and
had not derived income from a taxable activity within the preceding four years, and
had a residual income tax of more than $60,000 or more in the current year.

Generally, organisations aren’t liable to pay provisional tax in their first year of operation. If you meet the criteria to have an initial provisional tax liability you may have to pay interest. The interest cost may be reduced by making voluntary provisional tax payments. Print the date the organisation started to derive income from taxable activity in Box 20.

Interest rules for an initial provisional tax liability

Special rules apply when interest may be charged if your club or society has an initial provisional tax liability. It may be charged interest from the first, second or third instalment date, which is determined by the business start date. For most organisations with a balance date of 31 March, the start date for interest will be:

29 August, if the taxable activity started before 30 July of the same year
16 January, if the taxable activity started between 30 July and 16 December of the previous year
8 May, if the taxable activity started on or after 17 December of the previous year.

For organisations with a balance date of 31 March, and registered for six-monthly GST filing, the start date for interest will be:

29 October, if the taxable activity started before 30 September of the same year
8 May, if the taxable activity started on or after 30 September of the previous year.

If the organisation has a balance date other than 31 March, the provisional tax payment dates will generally be the 28th day of the 5th, 9th and 13th months following the balance date.

There are special rules about how interest is calculated when a club or society has an initial provisional tax liability and has changed its balance date.

For further information refer to the Provisional tax (IR289) guide.