Provisional vs Terminal Tax Calculator

This calculator works out your terminal tax, the final wash-up between the income tax you actually owe for the year and the provisional tax you paid in instalments along the way. New Zealand businesses and the self-employed pay provisional tax during the year, in instalments, as an estimate of the tax on income that has no PAYE deducted. After the year ends and the actual result is known, the true tax liability, the residual income tax, is compared with what was paid: if you paid too little provisional tax, you owe the shortfall as terminal tax; if you paid too much, you receive a refund. Knowing this figure in advance helps you avoid a nasty surprise and set aside the right amount. This tool makes it clear. You enter your total income tax liability for the year, the residual income tax, and the provisional tax you have already paid, and the calculator works out the terminal tax to pay, or the refund due, and shows your inputs for reference. The results update as you type. Use it to estimate your terminal tax bill, to plan the cash you will need at the terminal tax date, or to check whether your provisional payments were on track. The terminal tax is simply your total tax liability minus the provisional tax paid: a positive figure is payable, a negative figure is refunded. Getting your provisional estimate close to the final liability matters, because a large shortfall can attract use-of-money interest from Inland Revenue, while a large overpayment ties up cash you could have used. If you find you have significantly underpaid, options like tax pooling can reduce the interest cost of catching up. This calculates the wash-up; the rules around provisional methods, interest and due dates are detailed, so confirm with your accountant.

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Total tax liability / RIT ($)

Provisional tax paid ($)

$5,000 to pay

terminal tax

Tax liability$30,000

Provisional paid$25,000

StatusPay terminal tax

Terminal tax = total tax liability (RIT) - provisional tax paid. Positive means pay; negative means a refund. Large shortfalls may attract use-of-money interest. Confirm with your accountant.

How it works

The terminal tax is your total income tax liability for the year, the residual income tax, minus the provisional tax you have already paid in instalments. A positive result is the shortfall you must pay as terminal tax; a negative result is the overpayment that will be refunded to you.

Worked example

If your total tax liability for the year is $30,000 and you paid $25,000 of provisional tax, your terminal tax is $30,000 minus $25,000, which is $5,000 to pay. Had you paid $32,000 of provisional tax instead, you would be due a $2,000 refund.

Related calculators

Provisional Tax: provisional instalments.
Tax Pooling: reduce interest.
Use-of-Money Interest: IRD interest.
Business Income Tax: company tax.

Frequently asked questions

What is terminal tax?

Terminal tax is the final amount payable after the year's actual tax liability is compared with the provisional tax already paid. If you underpaid provisional tax, the shortfall is terminal tax; if you overpaid, you get a refund. It squares up the year.

What is residual income tax?

Residual income tax, or RIT, is your total income tax liability for the year after deducting tax credits, but before provisional tax payments. It is the figure compared against your provisional tax to work out the terminal tax to pay or refund.

What if I underpaid provisional tax?

You pay the shortfall as terminal tax, and a significant underpayment can attract use-of-money interest from Inland Revenue. Options such as tax pooling can reduce the interest cost of catching up. Keeping provisional payments close to the final liability avoids this.