Drought Affected Farmers Can Re-think Tax PaymentsRevenue
Revenue Minister Bill English reminded farmers today that if they were facing drought-related losses and cash flow problems they could re-estimate upcoming provisional tax payments.
"Many businesses will be paying provisional tax based on last year's income, or using higher income predictions from earlier in the year. This may not be appropriate for farmers facing drought-related losses and cash flow problems," said Mr English.
"Provisional tax payments that are higher than they need to be could really cripple these farmers.
"I want to remind farmers that they are able to re-estimate their provisional tax on or before the date on which a provisional tax instalment is due. They need to take reasonable care in making re-estimates, but for many farmers suddenly facing big losses because of the drought it could mean a big difference in their cash flow.
"For example a farmer who paid provisional tax instalments of $1000 on his first two instalments dates of 7 October 1998 and 7 February 1999, based on his income the year before, might well re-estimate his next instalment due 7 June 1999 as nil. If his 1998/99 tax return shows a loss for the year he will be repaid the first two instalments.
"If it turns out that more tax is owed than has been paid in provisional instalments, businesses will only be charged for the unpaid tax and use of money interest. A 20 percent shortfall penalty only applies if they don't take reasonable care in making the estimate," said Mr English.