Te huamoni kei runga i ngā utu tuwhene me ngā utu wāhi noa (UOMI) Interest on overpayments and underpayments (UOMI)

If you overpay any tax or duty, we'll pay you back with interest. If you underpay tax, we'll charge you interest. We may also charge a penalty with interest. This is often called use of money interest, or UOMI.

If your ability to make a tax payment on time has been affected by COVID-19, we may be able to write off use-of-money interest.

What interest is applied to

Interest applies to these taxes, duties and revenue types:

• casino duty
• child support deductions by employers (CSE)
• fringe benefit tax (FBT)
• gaming machine duty and problem gambling levy
• goods and services tax (GST)
• imputation accounts
• income tax
• KiwiSaver contributions
• lottery duty
• non resident withholding tax (on interest and dividends)
• PAYE deductions
• residential land withholding tax (RLWT)
• resident withholding tax (RWT) (on interest and dividends)
• student loan deductions by employers
• ESCT (employer superannuation contribution tax)
• totalisator duty (betting levy)
• Working for Families Tax Credits (WfFTC).

We do not apply interest for:

• amounts under $100
• child support payments.

Student loans may have interest applied.

Student loan interest and fees

Interest amounts

Interest gets calculated daily on your overpaid or underpaid tax. It does not compound and is not included when calculating penalties.

The interest rates are set by government and are based on market rates, so they vary over time.

When interest starts

If you've underpaid tax or duty, interest:

• starts on the day after the original due date for the amount owing, or
• starts from a new due date (if you received Working for Families Tax Credit and you meet specific criteria to have a new due date)
• stops on the day the overdue balance (including interest) gets paid in full.

If you've overpaid tax or duty, interest starts on the latest of either:

• the day after the original due date
• the day after payment.

If you need to file a tax return to get a refund of your overpayment, interest starts on the latest of the:

• original due date
• day after the payment that generates the refund (that's when the credit becomes available)
• date you filed your return.

In most cases, interest stops the day the overpaid tax is refunded or transferred to another tax account or period.

Interest you're paid is gross income

Any interest you're paid on an overpayment is gross income. You'll need to include it in your income tax return or income tax assessment for the year in which it's refunded. You need to do this even if you credit the interest towards paying other unpaid tax.

If your return is reassessed and we find that you've overpaid, you may be paid interest. This is also gross income but only in the income year following the year of assessment.

Underpaid interest is deductible

Interest you pay on underpayments of tax is deductible for business purposes. You can claim it as an expense on your income tax return.

If your return is reassessed and we find that you've underpaid, you may have to pay interest. This is also deductible, but only in the income year following the year of reassessment.

Interest on tax in dispute

When you're disputing a tax amount, you can put payment on hold until a decision is made. If we decide the amount in dispute is not right, we'll refund the disputed tax and pay you interest on it. If we decide that the amount in dispute is right, you'll have to pay us any outstanding amount and any interest on it.

Interest and extra time to pay

When you get a notice of assessment or a statement of account balance we'll give you up to an extra 30 days to pay. If you pay the balance within that timeframe, you do not need to pay the interest that gets added between the date the notice or statement was issued, and the date of the payment.

If you pay after more than 30 days, the interest amount will be recalculated, so the balance may not be cleared in full.

Interest and payments

If you make a payment to clear unpaid tax, it is used to pay off unpaid interest and then tax. The exception to this rule is for payments of provisional tax, where payments are used for provisional tax instalments as directed by the taxpayer.

Credit interest may be used to pay other unpaid taxes.

GST and provisional tax

There are different rules about interest on GST and provisional tax.

GST refunds

Interest on provisional tax