Terminal tax: when it's due, and why it can be bigger than you expect

Terminal tax is the final reckoning for a year’s income tax. Provisional tax was your best guess along the way; terminal tax is the difference between that guess and the real figure. When the guess was too low, or there was no guess at all, terminal tax can arrive as a shock.

When is terminal tax due?

For businesses with a 31 March balance date:

• 7 February of the following year if you don’t have a tax agent; or
• 7 April of the following year if you have a tax agent with an extension of time.

These dates come from business.govt.nz. If your balance date is different, the due date shifts accordingly. If a due date falls on a weekend or public holiday, it moves to the next working day.

So for the year ending 31 March 2026, terminal tax is due on 7 February 2027, or 7 April 2027 with an agent. Our due-date timeline shows it alongside your other tax dates.

What’s the difference between terminal and provisional tax?

	Provisional tax	Terminal tax
When	During the year, in instalments	After the year ends, once
Based on	Last year’s tax, an estimate, GST ratio or AIM	The actual year’s result
Applies when	Residual income tax over $5,000	Whenever tax is left to pay after provisional
Common problem	Instalments set too low or missed	A larger-than-expected balance

Read provisional tax for how the instalments are worked out.

Why does terminal tax spike?

• A stronger year. If profit jumps, instalments based on last year won’t cover it.
• The second-year effect. No provisional tax in year one means the whole year-one bill arrives as terminal tax, just as year-two provisional tax starts.
• Missed or reduced instalments. Anything not paid during the year lands at the end.
• Adjustments. Changes your accountant makes when finalising the accounts can add tax.

The spike often comes when cash is committed elsewhere, because a strong year usually means more stock, staff or equipment.

Terminal tax bigger than your bank balance? Ask whether funding can pay it on time. No credit check to enquire.

What happens if terminal tax is paid late?

Late terminal tax picks up a 1% penalty on the first day after the due date, then another 4% a week later if it’s still outstanding. The monthly 1% penalty doesn’t apply to income tax (IRD). Use-of-money interest is also charged on unpaid tax; for provisional taxpayers on the standard method with residual income tax under $60,000, interest generally starts from the day after the terminal tax due date (IRD).

What are your options if you can’t pay?

1. Tax pooling. Designed for income tax timing, including terminal tax. See tax pooling.
2. An instalment arrangement. Set up before the due date, only the first 1% penalty applies, though interest continues. See instalment arrangements.
3. A loan. Pay on time from borrowed funds and repay from future trading or receipts. See provisional and terminal tax funding.
4. A combination. For example, pool part and borrow for the rest, or borrow for terminal tax and set up an arrangement for an overdue GST period.

How do you avoid a terminal tax shock next year?

• Ask your accountant for a mid-year estimate of profit and tax.
• If profit is up, consider a voluntary extra payment before the final instalment, or use pooling.
• Put a percentage of every receipt into a tax account.
• Review your provisional tax method if income is uneven.

An illustrative example

Illustrative only. Not a real client and not an offer.

A Tauranga engineering consultancy, in its second year, has an agent and a 31 March balance date. Its terminal tax for year one, about $58,000, is due on 7 April, a few weeks before its third provisional instalment for year two. The accountant arranges to pool part of the terminal tax, and a short cash-flow loan covers the provisional instalment on time. By the following year, the business is on AIM and paying monthly.

Does having a tax agent change anything else?

The later due date is the main difference, and it’s a real cash-flow advantage: two extra months between the end of the tax year and the bill. An agent also helps you see the figure coming. Ask yours for an estimate of terminal tax well before the due date, ideally around the time your annual accounts are being finalised. One practical point: some important IRD notices now go to the company in myIR rather than to the agent, so don’t assume your agent will catch every message about overdue amounts. Keep an eye on myIR yourself. See IRD overdue notices.

What if you disagree with the amount?

If the terminal tax figure looks wrong, ask your accountant to check the return, the provisional payments credited and any adjustments. Payments sometimes land against the wrong year or tax type. Sort out errors quickly, but don’t let a query run past the due date without paying what’s clearly owed. If the figure is right but simply unwelcome, see why you owe IRD for the usual causes.

Pay on time, plan for next year

If terminal tax is due and the money isn’t there, start a 60-second enquiry. There’s no credit check to ask, your enquiry isn’t shared with a crowd of lenders, and a real person will call you. Please give us the amount, the due date and whether you have a tax agent, as accurately as you can, so we can help you compare a loan with pooling or an arrangement.