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Don’t take myIR statements at face value

  • MyIR doesn’t always show the amounts your client is actually incurring interest on if tax for the year is underpaid, especially in provisional tax edge cases.
  • In some situations, the amounts shown on myIR are based on penalty thresholds, while interest accrues on a different calculation altogether.
  • Where there are discrepancies, understanding the real RIT position is critical to stopping interest and penalties once returns for the year are filed.

 

Sometimes a myIR statement isn’t quite what it seems.

 

Now that you’ve filed all your clients’ 2025 income tax returns, attention turns to settling underpaid positions with Inland Revenue (IR) and stopping further use‑of‑money interest (UOMI) from accruing – often using tax pooling transactions.

 

A myIR statement will be your first port of call. After all, it shows what’s due and when, right?

 

Well, not quite. First glances can be misleading. 

 

Sometimes there are situations where the assessment amounts shown on myIR don’t align with the amounts on which UOMI is actually being charged. If you rely solely on what myIR shows, your client could still be incurring interest – even when it looks like everything is covered.

 

So, to ensure they settle correctly before legislative timeframes lapse, here are some scenarios where this mismatch can arise.

 

The taxpayer estimated provisional tax for the year

 

What myIR shows: a myIR displays assessment amounts based on what a taxpayer needed to pay at an instalment date to avoid late payment penalties.

 

That amount is the lesser of:

  • The amount initially estimated by the taxpayer at the time of that date, or
  • One‑third – or one‑half if the taxpayer files six‑monthly GST returns – of the taxpayer’s residual income tax (RIT) for the year.

 

When the initial estimated amount is lower, myIR will show an assessment based only on that smaller figure. This means IR will be applying late payment penalties to one amount and UOMI to another.

 

UOMI basis: UOMI is charged on the RIT for the year, split evenly across the taxpayer’s provisional tax instalments.

 

What to buy from Tax Traders: top up at relevant instalment dates to ensure a third of the RIT for year at each instalment date is met. If taxpayer is a six-monthly GST filer, then top up to ensure half of the RIT for the year at each date is met. 

 

A new provisional taxpayer with an initial provisional tax liability

 

This applies where a taxpayer has RIT of $60,000 or more in their first year of trading.

 

What myIR shows: nil assessment amounts at each provisional tax date, with the full RIT due at the taxpayer’s terminal tax.

 

UOMI basis: UOMI is charged on the RIT spread across the number of provisional tax instalments the taxpayer could’ve paid during the year. That number will be either three, two or one, depending on when the taxpayer started trading.

 

You can read more about the new provisional tax criteria here. 

 

What to buy from Tax Traders: Top up at each instalment date based on a third or half of RIT. In situations where one instalment is payable, buy the entire RIT amount at the date of final instalment.

 

A taxpayer using the standard method coming out of prior year losses

 

What myIR shows: nil assessment amounts at each provisional tax date, with the RIT due in full at the taxpayer’s terminal tax.

 

UOMI basis: UOMI is charged from the final provisional tax instalment date, based on the amount required to settle the RIT in full.

 

What to buy from Tax Traders: the RIT for the year at the date of the final instalment.

 

A salary or wage earner with RIT of $60,000 or more after receiving one-off income

 

What myIR shows: as above – nil assessments during the year, with the RIT due at terminal tax.

 

UOMI basis: as above – UOMI applies from the final provisional tax instalment date on the amount required to settle the RIT in full.

 

What to buy from Tax Traders: as above – the RIT for the year at the date of the final instalment.

 

Don’t worry – Tax Traders’ RIT Tool has you covered

 

If you’re unsure what your client actually needed to pay at each provisional tax date to correctly settle their 2025 income tax liability, the Tax Traders RIT Tool is your go‑to.

 

It automatically applies the detailed rules in the Income Tax Act 2007 and the Tax Administration Act 1994 to calculate the correct amounts due at each provisional tax instalment. Its built‑in logic identifies edge cases that are easy to miss, bringing clarity to complex situations.

 

The tool also considers any deposits or payment arrangements already in place with Tax Traders. Where shortfalls exist, it calculates required top‑ups and lets you choose the most appropriate payment method for your client.

 

Check out Tax Traders’ RIT Tool today to ensure you're clients are settling their 2025 income tax positions with IR correctly.