Provisional tax is how New Zealand businesses pay income tax in instalments through the year rather than in one lump sum after filing. For most clients with a 31 March balance date, the year splits into three payments, and each one needs to be calculated, communicated, approved, and paid before its due date. The amount depends on which method the client is on (standard, estimation, ratio, or AIM) and on their residual income tax (RIT) from the prior year or a current-year estimate.
Timing and estimates matter because Inland Revenue (IRD) charges use-of-money interest and late-payment penalties when instalments are short or missed. Underestimate and a client can face interest on the shortfall; overpay and they tie up cash they did not need to. Without a repeatable process the work tends to scatter: an instalment date slips past unnoticed, a client never confirms payment, or nobody checks whether year-to-date performance has drifted far enough from the prior year to justify re-estimating. A single template keeps every instalment running the same way, for every client, across the team.
When to run it
For clients with a 31 March balance date the standard instalment dates are 28 August, 15 January, and 7 May. Run this template once per instalment, scheduling each occurrence a couple of weeks ahead of the due date so there is time for calculation, client approval, and payment. Assign a clear owner per client so it is never ambiguous who is responsible for getting the instalment out the door. Clients on the Accounting Income Method (AIM) pay through their GST returns instead and should follow that workflow rather than this one.
How to run it in Tidyflow
Set this up as a reusable job template so every instalment job arrives with the same steps already in place. Each subtask becomes a checkbox your team works through, from confirming the method to recording the payment, and you can attach the template to a recurring schedule so a fresh job is created automatically for each instalment date. Manage the whole cycle in workflow management and lean on recurring tasks so nothing depends on someone remembering a calendar date.
The client-facing steps go out through the client portal and requests: the client approves the instalment amount, confirms payment, and flags any significant change in expected income, all tracked against the job rather than buried in email. Pair this with solid tax compliance records so the trail of who approved what, and when, is always there.
Common pitfalls
- Sticking with the standard method when the client’s income has shifted enough that estimation would avoid interest or a large final payment.
- Missing an instalment date because the job was never scheduled ahead of the deadline.
- Using the wrong IRD payment reference or tax type, so the payment lands against the wrong period.
- Treating an AIM client like a standard one, when their provisional tax flows through the GST return instead.
- Failing to re-check year-to-date performance before the later instalments, leaving a shortfall to surface at year end.