Perspective: Tips for managing upcoming provisional tax payments

Tips for managing upcoming provisional tax payments

Tax Alerts - May 2022

Now 31 March 2022 has passed, the next major milestone for many taxpayers is 7 May 2022 because this is the due date for the third instalment of 2022 provisional tax for those taxpayers with a March balance date. This year, 7 May falls on a Saturday, so the payments made before the end of the next working day of Monday 9 May will be treated as made in time.

The majority of taxpayers who pay provisional tax use the standard method, which means the final instalment is calculated using the prior year’s residual income tax (RIT) plus an uplift factor of 5%. But of course, provisional tax paid based on historical results may not be reflective of the actual results for the 2021-22 tax year. This may give rise to an exposure to use of money interest (UOMI) for some taxpayers. Others may be struggling to manage cashflow in light of the current environment. In this article, we remind taxpayers of the basic rules and explore what options there are for managing provisional tax, cash flow and use of money interest. It focusses on due dates for a standard March balance date, but the comments below will be equally applicable for taxpayers with other balance dates.

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