Tax IQ shows all the tax you need to pay, except for payroll taxes (coming in v2). With income tax, Tax IQ shows everything that Inland Revenue currently has recorded that you need to pay. If you’re the kind of person who likes lots of detail, please read on.
How Income Tax works
Let’s start by talking about income tax. Firstly, you’ll need to remember that if your business is making a profit, then you’ll probably have taxes to pay each year. There’s two different situations at play here, people who pay provisional tax and those who don’t.
1) No provisional tax
If your tax bill is under $5,000 (which means you’re not a provisional taxpayer) then your tax bill is due 7 April the year following (7 February if you don’t use an accountant to do your taxes). Your actual tax return isn’t due with Inland Revenue until 31 March at the latest, which is 7 days before the bill due date! So if you’re not the most organised, we might not be able to let you know your tax bill until right when it is due.
Basically if you haven’t filed a tax return, then Inland Revenue doesn’t know how much you owe. So Tax IQ won’t be able to show you.
2) Provisional tax
If you are a provisional taxpayer, then you pay calculated tax throughout the year as you earn your income, over three instalments. This is supposed to approximate your tax bill. For most businesses (those with annual tax bills under $60,000), there’s no penalties or interest charged if you pay those calculated amounts that Inland Revenue tells you to pay. However, those amounts are only approximates. So if you don’t end up paying the full amount of actual tax you won, which will be calculated in your tax return, then you will have a top-up payment due on the 7 April of the year following. That amount can only be calculated once you’ve filed your tax return, as in the example above, so filing early can give you more clarity.
The point of all of this is, the earlier you get your information to your accountant, the more time you’ll have to talk tax strategy and plan for upcoming payments. And we are always here to answer any questions or look at tax options for you. Just get in touch with Support if you want to look at how you’re tracking and your tax options going forward.
Other tax types
Finally we need to mention that Tax IQ covers more than just income tax. Your student loan repayments are calculated in the same way as provisional tax, so filing early will provide the same clarity talked about above.
The other tax types are a bit more straightforward. If you’re GST registered and filing returns then Tax IQ won’t show the amounts you need to pay until those returns are filed. The same goes for FBT returns, RWT returns, the list goes on. And if you’re an employer, we also can’t currently display payroll taxes, so you’ll need to budget for these each time you complete payday filing.