Instalments are calculated at 105% uplift of previous year’s residual income tax; or 110% of the year before residual income tax (if previous year income tax return is not filed).
Use of money interest is calculated on lowest cost option based on the tax instalment paid per standard uplift or in equal instalment.
If paid in full and on time, use of money interest only applies on underpaid tax from P3 (over $60k taxpayers).
Payments are due during the year even if the tax payers expects to have a lower residual income tax in current year.
A formal estimate is required to be filed. (this can be done online in myIR).
Payments are based on 1/3rd of the estimated residual income tax on each provisional tax date.
Instalment can be paid based on expected liability, particularly if expected amount is lower than standard method.
Use of money interest is calculated from each instalment date on any underpaid amount.
If taxpayers elects into the estimation method, the same method will apply to all “provisional tax associates” / group entities.
Higher frequency of payments.
Good for cash sales business.
Refunds are paid in the period, rather than waiting for the return to be finalised.
Increased frequency of filing obligations.
Cannot use tax pooling for a missed payment.
High overall compliance cost.