Lesson 4 - What is a preliminary tax?

It's time for the next chapter of our FREE course "Income Tax Return". Lesson 4 -?What is a preliminary tax?

Preliminary tax is the estimated amount of tax which you expect to pay for the current year. There are three options to estimate your preliminary tax.

• 90% of the tax due for the following year
• 100% of the tax due for the previous year
• 105% of the tax due two years ago

The most common option is 100% of the tax liability for the previous year.

For example, when your file your first income tax return you may need to pay the tax due for the previous year and also the preliminary tax for the current year. So ultimately you may find yourself in a situation when you have to pay a double amount of tax!

It’s extremely important to be aware of preliminary tax payment obligations because many sole traders fall into cash flow difficulties because of that.

However, this will relate only to the first year, in the following years you only pay the remaining balance plus your preliminary tax.?

To find out more take a look yourself...