Mr's quick answer
Both countries make businesses pay income tax during the year rather than in one lump. Australia uses PAYG instalments, usually paid quarterly with the BAS, for businesses that meet ATO entry thresholds. New Zealand uses provisional tax, which applies if your last return showed more than $5,000 of tax to pay; under the standard option with a 31 March balance date the instalments fall on 28 August, 15 January and 7 May.
Key points
- Australia's income year runs 1 July to 30 June; New Zealand's standard year runs 1 April to 31 March.
- AU: PAYG instalments, usually quarterly with the BAS, once you meet the ATO's entry thresholds.
- NZ: provisional tax once residual income tax exceeds $5,000, usually three instalments.
- Both systems are based on last year's result unless you choose another method, so a growth year can bring a catch-up bill.
- AU income year
- 1 July – 30 June
- NZ standard year
- 1 April – 31 March
- NZ provisional tax trigger
- More than $5,000 tax at year-end
- NZ standard instalments
- 28 Aug, 15 Jan, 7 May
Nobody enjoys a tax bill, but the one that really hurts is the one you didn’t see coming. Australia and New Zealand both try to soften the blow by collecting income tax in instalments through the year. Australia calls it PAYG instalments. New Zealand calls it provisional tax. Same goal, different rules, and very different calendars, because the two countries don’t even agree on when the year ends.
How do the two systems compare?
| Australia: PAYG instalments | New Zealand: provisional tax | |
|---|---|---|
| Income year | 1 July to 30 June | Standard balance date 31 March (year from 1 April) |
| Who’s in | Entered by the ATO once thresholds are met | Anyone whose last return showed more than $5,000 tax to pay |
| How often | Usually quarterly, with the BAS | Usually three instalments under the standard option |
| Usual due dates | The 28th of Oct, Feb, Apr and Jul for quarterly payers | 28 Aug, 15 Jan, 7 May (standard option, 31 March balance date) |
| How it’s worked out | ATO-calculated amount, or a rate applied to your instalment income | Standard, estimation, ratio or accounting income method |
How do PAYG instalments work in Australia?
PAYG instalments are pre-payments of the income tax you’ll owe for the year. The ATO enters you automatically once your latest tax return crosses its thresholds. Sole traders, other individuals and trusts come in when their latest figures show all three: at least $4,000 of instalment income, an assessed tax bill of at least $1,000, and notional tax of at least $500. Companies have their own triggers, such as notional tax of $500 or above, or instalment income reaching $2 million.
Most small businesses pay quarterly alongside their BAS, so the due dates line up with the BAS: the 28th of October, February, April and July. You can usually either pay the amount the ATO works out or apply an instalment rate to your actual income for the quarter, which can help when income dips.
How does provisional tax work in New Zealand?
Provisional tax is New Zealand’s version. IRD brings you in once your most recent return left you with more than $5,000 of tax to pay at year-end. You can also opt in voluntarily.
Under the standard option with a 31 March balance date, if you’re not GST registered or you file two-monthly GST, there are three instalments, due on 28 August, then 15 January, then 7 May. IRD also offers the estimation option, the ratio option (linked to GST) and the accounting income method (AIM), which suits businesses with software that can calculate tax as they go.
The New Zealand site has a deeper explainer on provisional tax and your loan application, and the guide on the second-year provisional tax shock is worth a read if you’ve just had a good year.
Instalment due and the cash isn’t there? Mr’s people in each country look at tax-time funding case by case. Enquiring is free and credit-check-free. Choose your country to start.
Why do growing businesses get caught out?
Both systems generally base this year’s instalments on last year’s result. That works beautifully when your business is steady. When it’s growing fast, it creates a timing gap:
- Year one is profitable, but you weren’t in the instalment system yet, so you paid nothing along the way.
- The return for year one lands with a full year’s tax due.
- At the same time, year two’s instalments start, based on year one’s profit.
Suddenly you’re paying for two years in a short window. Australians and New Zealanders both know this feeling, just at different times of the calendar. Using the instalment-rate method in Australia, or the estimation, ratio or AIM options in New Zealand, can line payments up better with what you actually earn, but talk to your accountant before switching.
What about businesses with two year-ends?
If you run an Australian entity and a New Zealand entity, you’re juggling a 30 June year-end and (usually) a 31 March year-end. That means two sets of accounts, two sets of instalments and two return seasons a quarter apart. It isn’t harder so much as busier. Our guide to planning for two year-ends shows how owners keep it calm, and the side-by-side tax due dates guide lays both calendars out together.
How do lenders read instalment history?
Your instalment record tells a lender a few useful things:
- Your profit trend. Rising instalments usually mean rising profit, which is a good story.
- Your discipline. Instalments paid on time suggest cash flow is planned, not improvised.
- Any hidden debt. Missed instalments become tax debt, which lenders on both sides consider case by case, ideally with an arrangement in place.
Lenders also look at whether your accounts are up to date. A business that’s two years behind on its returns is hard to lend to on either side, because nobody can see the current picture.
Illustrative example
Illustrative only. A Kiwi-owned IT consultancy has a New Zealand company (31 March balance date) and an Australian company (30 June year-end). In New Zealand, its standard-option provisional tax falls in August, January and May. In Australia, its PAYG instalments follow the quarterly BAS dates. The owner sets up one shared spreadsheet with both calendars and a separate tax account for each company, transferring a fixed share of every receipt. When a big Australian contract boosts profit, she switches the Australian instalments to the rate method on her accountant’s advice so payments follow actual income.
Ready to smooth out tax time?
Paying tax as you go is meant to soften the blow, and with a bit of planning it does. If an instalment has turned up at an awkward moment, a quick enquiry is a good first move: it doesn’t trigger a credit check, it isn’t sent out to a string of lenders, and a person in your country reads it properly. Note what’s due and when on the form, accurately, and you’ll get a useful reply. Pick your side of the Tasman.
Frequently asked questions
Who has to pay PAYG instalments in Australia?
The ATO automatically enters individuals (including sole traders) and trusts when their latest return shows instalment income of $4,000 or more, tax payable of $1,000 or more and estimated tax of $500 or more. Companies are entered if, among other things, their estimated tax is $500 or more or their instalment income is $2 million or more.
Who has to pay provisional tax in New Zealand?
IRD says you'll have to pay provisional tax if you had to pay more than $5,000 tax at the end of the year from your last return. You can also choose to pay it voluntarily if you expect a bill above that level.
When are provisional tax instalments due?
For the standard option with a 31 March balance date, if you're not GST registered or you file two-monthly GST returns, IRD lists the three instalments as 28 August, 15 January and 7 May. Other methods and balance dates have different dates.
Why did my provisional tax or PAYG instalment suddenly jump?
Both systems usually work from your most recent tax result. After a strong year, the next year's instalments rise to match, and if you've grown fast you may also face a catch-up bill for the year just finished. Owners often call it the second-year shock.
Can a lender help with a provisional tax or instalment bill?
It's a common reason to enquire on both sides. A lender will want to understand the business's profit, why the cash isn't there, and how the loan will be repaid, and will look at any tax debt case by case.