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Are you beginning to earn income from your business or from a partnership? The government has introduced new laws which mean you’ll get a tax discount when you make voluntary income tax payments before you have to start paying provisional tax.

The Inland Revenue Department says that you can get a discount if:

• You earn self-employed income, or income from a partnership (you don’t qualify if you use a company or trust for your business).

• Your main source of income comes from a business - it exceeds any investment, rental, beneficiary income or income from royalties.

• You make voluntary income tax payments before the

end of the tax year in which you intend to claim the discount (in most cases this is 31 March).

• You don’t have to pay provisional tax.

• You didn’t have to pay provisional tax in the previous four years.

Note: You need to make the voluntary payments before the end of the same tax year in which you claim the discount. You also need to keep whatever is smaller - the amount of voluntary payments you’ve made or the amount of end-of-year tax - in your income tax account until the end-of-year tax date (7 February or 7 April if you have a tax agent).

How do you calculate the discount?
The discount is 6.7% of the smaller of your total voluntary tax payments for the year, and 105% of your end-of-year tax.

How do you make a claim?
The individual income tax return (IR 3) has a tick box so you can indicate that you want to claim the discount in that year. The 2006 Return Guide contains more information about the eligibility criteria.

Do you need more information?
Starting at page 50 of the Tax Information Bulletin, Volume 17, No 1, there is detailed information on the discount including:

• A flow chart to assess eligibility.

• Examples of calculations.

• Information on when it is best to claim the discount.