FIF and provisional tax: when FIF income tips you over $5,000

Salary and wages have PAYE taken off. FIF income does not: it is a calculated figure, and the tax on it is paid when you file. Once that tax, your residual income tax (RIT), is more than $5,000, IRD expects you to pay provisional tax for the following year in instalments (IRD provisional tax page; IR3G 2026 p51). Here is how FIF investors usually meet it, with worked figures.

The $5,000 rule

Inland Revenue puts it plainly: "You'll have to pay provisional tax if you had to pay more than $5,000 tax at the end of the year from your last return." That figure is your residual income tax: the tax on your income for the year, less tax already deducted (such as PAYE and RWT) and credits such as foreign tax credits. On the IR3 it is the figure in Box 36A (IR3G 2026 p51).

Why FIF investors meet this: under fair dividend rate (FDR) or comparative value (CV), FIF income is worked out at the end of the year, and dividends from FIF shares are not taxed separately (IR461 p10). Nothing in the system deducts NZ tax from that income as it arises. Some foreign withholding tax is taken off dividends, and you can claim it as a credit up to the NZ tax on that company's FIF income (IR461 p20), but the rest of the tax falls due when you file. That last point, that FIF income has no NZ tax taken at source, is our inference rather than an IRD statement in FIF terms.

FIF income can also arise with no cash at all: IR461 notes it "can arise under the FIF rules even if there are no receipts during the year" (IR461 p22 note 4).

Worked example: where the line falls

Ana earns $100,000 of salary with PAYE deducted correctly, uses FDR, and has no foreign tax credits. Using our engine at 2025/26 rates:

At $400,000, the standard option sets next year's provisional tax at last year's RIT plus 5% (IR3G 2026 p52): $6,600.00 x 1.05 = $6,930.00, or $2,310.00 per instalment over three instalments.

Two things change the picture in real life:

• Foreign tax credits reduce RIT. US dividend withholding on a large portfolio can bring a figure near $5,000 back under it.
• Choosing CV in a weak year can reduce FIF income to nil for individuals (IR461 p14), and with it the RIT. See FDR or CV.

Run your own figures on our FDR calculator, which works out the extra tax on your FIF income at your marginal rate.

The ways to pay

IRD says there are four options for working out provisional tax: standard, estimation, ratio, and the accounting income method (AIM). The last two are designed around business income and GST, so for a salaried FIF investor the practical choice is between the first two.

FDR has one feature that helps with estimating: the main figure is 5% of the 1 April value, so you know most of the year's FDR income on the first day of the year. Only a quick sale adjustment or a later switch to CV changes it. If you estimate, read IRD's page on the estimation option first, because estimating too low has interest consequences.

Due dates

For a standard 31 March balance date using the standard or estimation option, provisional tax is paid in three instalments (IRD payment dates page):

For the 2026/27 year those fall on 28 August 2026, 15 January 2027 and 7 May 2027. Check IRD's payment dates page for each year.

Because the requirement is based on your last return, a big FIF year usually shows up as a provisional tax letter only after you file. If you file late in the year, the first instalment may already have passed by the time you find out. Filing early, or making a voluntary payment, avoids that surprise.

The cash flow over two years

The year you first become a provisional taxpayer is the one that hurts, because two years' tax lands close together. Following Ana, with 2026/27 tax rates for the second year:

So in the twelve months after her 2025/26 return, Ana pays both the $6,600.00 for 2025/26 and most of the 2026/27 tax. Setting money aside from dividends, or selling a small parcel, ahead of the August instalment is a common way to manage it. That is a cash flow point, not advice about what to sell.

Interest if you pay too little

Use-of-money interest is "a charge for the use of money", not a penalty (IRD). For standard option payers, IRD's interest page says:

• RIT under $60,000: interest is charged or paid from the day after your end-of-year tax due date, not from each instalment.
• RIT of $60,000 or more: interest runs from the day after the final instalment date, as long as your other instalments were paid in full and on time.
• IRD does not charge or pay interest on an under or overpayment of $100 or less.

In Ana's case, with 2026/27 RIT of $7,425.00, the under $60,000 rule applies: if her three instalments fall short of the final figure, interest runs on the shortfall only from the day after her end-of-year due date. For most FIF investors on the standard option, RIT is well under $60,000, so the rule that matters is paying the full amount by the end-of-year due date. Late payment penalties are a separate matter; see IRD.

Other points for FIF investors

• Foreign super lump sums. A one-off taxable lump sum or transfer can push RIT over $5,000 for one year. If the receiving NZ scheme pays tax at 28% under scheme pays, IR1024 says provisional tax is not affected. See UK pensions.
• Moving under the threshold. If you sell down and your cost stays at $50,000 or less all year, you may no longer have FIF income, and the estimation option lets you reflect that. Remember the 4-year look-back if you previously opted in.
• RWT on FIF dividends. Sharesies says investors over the threshold can opt out of RWT on FIF dividends (Sharesies help, September 2026; single platform source). Where RWT is deducted, it is a credit that reduces RIT.
• Where it goes in the return. Our IR3 guide covers Boxes 17A and 17B.

This is general information, not tax advice; check with your accountant or IRD before choosing an option. Rules checked 12 November 2026.

Questions

Do I pay provisional tax in my first big FIF year?

Usually not in that year. The test looks at your last return: if its RIT was more than $5,000, provisional tax applies to the following year.

Does FDR income count towards the $5,000?

Yes. FIF income is taxable income, and the tax on it, after credits, is part of your residual income tax.

Can I just pay it all when I file?

If you are a provisional taxpayer, instalments are due on the set dates. For RIT under $60,000 on the standard option, interest runs from the day after the end-of-year due date (IRD interest page).

Do foreign tax credits reduce provisional tax?

They reduce your residual income tax, which is what the standard option is based on.

What if my FIF income will be much lower this year?

You can use the estimation option and estimate a lower figure, for example after selling down or in a year you expect to choose comparative value. Read IRD's estimation option page first, because an estimate that turns out too low has interest consequences.