AIM - new provisional tax option for small businesses
IRD has brought out a new way to pay provisional tax, which they have called AIM accounting income method. Basically, this is filing a mini tax return every two months, opposed to just the end of the year. Sounds great on the surface but once you start getting into the nitty gritty there are many aspects to really think about before you decide if this new method suits your business and whether your accounting system even allows for this new method. Xero is only compatible if the return is filed through your accountant, not directly from the program; and assuming all accountants use a program that is compatible in the first place. Good news is that ours is! However, this will probably end up costing you more in the long run as you still have to file a tax return at the end of the year. The success of this method still relies on the information in the accounting software being correct to begin with - so how good and accurate is your bookkeeping? We highly recommend that you give Kelly a call to discuss, if you are interested in this method for your business. Alternatively, if we manage your bookkeeping and feel it will benefit you, we will discuss with you.
AIM may suit a business that:
Is using a compatible cloud-based accounting program that is kept up-to-date with accurate bookkeeping – this will include registering and depreciating fixed assets, bringing in loan interest each month, allocating shareholder salaries etc (these tasks are generally done by your bookkeeper or accountant)
Has stable income through-out the year and does not have a peak season
Is not very good at saving their cash for tax payments
Does not have complex end of year tax adjustments, such as grouping tax losses from other companies
Does not use tax pooling to make their tax payments
Whose circumstances change throughout the year where they have overpaid tax it will be a lot quicker to get a refund
However, our overall recommendation, at the moment, is that this will not suit most businesses. But we will base our final recommendation on a case by case scenario.
For additional information, check out this link https://www.ird.govt.nz/news-updates/accounting-income-method-prov-tax.html?id=201801mybusiness
