Provisional tax

This is a hypothetical scenario because I haven't actually found myself in this situation, but let's say you made a one-off capital gain from selling an investment which you declared in your IR3 return and you had more than $2,500 tax to pay... would that mean you're liable to pay provisional tax the following year even though it was a one-off occurrence and you weren't actually earning any untaxed income the following year?

Hoo-boy! Thats a can of worms you're opening!!
The IRD site has lots of scenarios like this so that might give you a bit of insight.
There are posts here with a lot of info about potential tax liability on selling investments too.

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Originally Posted by Citizen Erased

This is a hypothetical scenario because I haven't actually found myself in this situation, but let's say you made a one-off capital gain from selling an investment which you declared in your IR3 return and you had more than $2,500 tax to pay... would that mean you're liable to pay provisional tax the following year even though it was a one-off occurrence and you weren't actually earning any untaxed income the following year?

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I assume you are refer to a taxable gain on sale, not a capital gain which is non taxable.

Not sure of the answer but if you dont expect to repeat, you could file an estimate which would override the provisional tax based on the prior year amount.

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Originally Posted by Citizen Erased

This is a hypothetical scenario because I haven't actually found myself in this situation, but let's say you made a one-off capital gain from selling an investment which you declared in your IR3 return and you had more than $2,500 tax to pay... would that mean you're liable to pay provisional tax the following year even though it was a one-off occurrence and you weren't actually earning any untaxed income the following year?

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If you used the standard calculation for estimating provisional tax, then yes you are correct. Of course as others have said you could estimate a lower figure. But if are wrong and you have another good share trading year then the tax department will ping you for underestimating your provisional tax. This is why as a provisional taxpayer I always use the standard tax estimate calculator.

SNOOPY

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Originally Posted by Snoopy

Of course as others have said you could estimate a lower figure. But if are wrong and you have another good share trading year then the tax department will ping you for underestimating your provisional tax.

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Do you know of anyone who has ever been 'pinged'. The estimate only has to be reasonable at the time you make it.

However, making an estimate may influence the threashold you pay Use of Money Interest on - its been years since I looked at this for an individual.

As an individual you will only be pinged(that is use of money interest) if you under estimate. Interest calculated from each instalment. However you can reestimate during the year and pay extra provisional tax at any time.

If a company or a trust then you will pay interest if your residual tax is over $2500. This I learnt the hard way.

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Originally Posted by Harvey Specter

I assume you are refer to a taxable gain on sale, not a capital gain which is non taxable.

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Yes, I worded that badly.

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Originally Posted by Snoopy

If you used the standard calculation for estimating provisional tax, then yes you are correct. Of course as others have said you could estimate a lower figure. But if are wrong and you have another good share trading year then the tax department will ping you for underestimating your provisional tax. This is why as a provisional taxpayer I always use the standard tax estimate calculator.SNOOPY

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It's not actually related to shares. I do hold a few shares, but don't actively trade, so that's not a tax issue for me. I've got another investment in derivatives that will certainly result in taxable income when I cash out. So if I was confident that I wouldn't have any untaxed investment income the following year could I estimate my provisional tax at zero?

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Originally Posted by Citizen Erased

It's not actually related to shares. I do hold a few shares, but don't actively trade, so that's not a tax issue for me. I've got another investment in derivatives that will certainly result in taxable income when I cash out. So if I was confident that I wouldn't have any untaxed investment income the following year could I estimate my provisional tax at zero?

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Yes. I did that last year. Estimated $200 income to cover any unforeseen income and paid accordingly.