What is use-of-money interest and when does it apply in NZ?

Use-of-money interest (UOMI) is interest charged by Inland Revenue when you underpay your tax obligations. It is calculated from the day your payment was due until the day it is received. **When UOMI applies:** - Tax paid late on your IR3 (after 7 February or agent deadline) - Provisional tax instalments paid late or insufficient - GST paid late **Current rates (check IR for current rates):** IR's UOMI rates are set by regulation and change periodically. The rate charged on underpayments is typically significantly higher than the rate paid on overpayments. **How to avoid UOMI on provisional tax:** Use the standard uplift method (105% or 110% of prior year RIT) and pay each instalment on time. If you use the estimation method and underpay by more than certain thresholds, UOMI will apply. Interestingly, IR also pays you interest (at a lower rate) if you overpay your provisional tax.

• Charged on tax paid late or provisional tax shortfalls
• Applies from the due date until the tax is received
• Higher rate charged on underpayments than paid on overpayments
• Avoid by using standard uplift method for provisional tax
• IR pays interest to you on overpayments (at a lower rate)