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Provisional Tax - Coggle Diagram
Provisional Tax
About
- Two compulsory payments per tax year are required
- And the second covering the last six months of the year of assessment, paid before the end of the year of assessment (last day of financial year-end).
- With the first covering the first six months of the year of assessment
- Provisional taxpayers are also required to submit a provisional tax return, estimating their taxable income for the year.
- The taxpayer may not make an estimate of taxable income that is less than the "basic amount" unless the Commissioner agrees to accept a lower estimate.
- If you earn income that is not just from a salary, allowance, or advance payment, if you are a company, or if the Commissioner notifies you that you are a provisional taxpayer,
- You must register as a provisional taxpayer within 21 business days of becoming obligated to register.
- A voluntary third provisional tax payment can also be made, which can help to avoid interest. This payment is due within seven months after the year of assessment ends on the last day of February.
- Provisional tax is a method of collecting an individual's normal tax liability due to non-remuneration income, such as rent or interest.
- It is an advance payment of normal tax for the year and is payable on a six-monthly basis.
- Excluded from the definition of provisional taxpayers are certain tax-exempt organizations and certain individuals, such as
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Or whose taxable income is derived from interest, dividends, foreign dividends, rental from the letting of fixed property, and remuneration from an employer not registered for employees' tax.
Basic Amount
The Basic Amount is the minimum estimate of taxable income a provisional taxpayer can make for the year.
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If the estimate is made more than 18 months after the end of the latest preceding year of assessment that has been assessed in relation to the estimate, the Basic Amount must be increased by 8% per annum of that amount from the end of the latest year assessed to the end of the year of assessment for which provisional tax is being calculated and paid.
For example, if the latest assessed year was 2019 and the estimate is made in 2022 (more than 18 months after the end of the latest assessed year), then the Basic Amount would be increased by 8% per year for the period from 2019 to 2022, and this increased amount would be used to calculate the provisional tax for 2022.
If the latest available assessment is issued within 14 days before the provisional tax estimate is due, the taxpayer must use the taxable income in the Preceding year of assessment they received, increased by 8% per annum.
If the latest assessment is not available, and the estimate must be made more than 18 months after the end of the latest preceding year of assessment, the Basic Amount must be increased by 8% per annum for each year of assessment that has passed up to the year of assessment for which the payment is due.