We strongly recommend filing your returns and paying your tax on time. You may be charged penalties if you fail to do so. Additionally, Inland Revenue may also charge interest on late payments. This is called use of money interest (UOMI).
Interest is applied to most tax types. For the 2020 income year onwards if you pay a provisional tax instalment late or do not pay the assessed amount, you will no longer be protected by the safe harbour rules. Interest will continue to be charged until the residual income tax, once assessed, has been paid. This can result in quite a substantial amount of interest of your terminal tax if not paid early.
Interest gets calculated daily on your overpaid or underpaid tax. Since 8 May 2020 the interest rate on underpaid tax sits at 7.00% and the rate for overpaid tax at 0.00%.
Due to COVID 19, the commissioner may remit penalties and UOMI under certain circumstances. You can find more information here.
Please talk to our team if you have any questions.