The Accounting Income Method
The Accounting Income Method or AIM is the new provisional Tax Payment option and is being introduced by Inland Revenue on the 1st April.
Most of you will have already heard recent releases from IRD relating to this provisional tax option. It involves making more regular tax payments throughout the year, in theory the IRD are claiming that you’ll only need to pay provisional tax when your business makes a profit. This should help you to avoid cash flow problems.
What are the benefits?
- Only paying taxes when you have a profit, which is perfect for seasonal businesses.
- Makes it easy to keep tax payments up to date throughout the year.
- Helps with cash flow management especially if you have lean cash reserves.
- Tax figures are no longer calculated based off the previous year.
- Should be little to no terminal tax bills to pay at the end of the year.
How does this new tax option work?
- You will need to opt into the scheme at the beginning of each financial year, or if you’re a new business you can opt in anytime from the first day of trading.
- The AIM accounting software will evaluate your coded transactions and produce a “Statement of Activity’ report.
- You can review this report and can make adjustments where necessary or if you’re not sure what corrections need to be made get in touch and we can help.
- The provisional taxes payable will need to be paid by the 28th of the following month, refunds can be generated early too if the business is incurring losses.
What do you need to do for AIM?
- Keep accounts updated and correctly record information.
- If you’re late there will still be penalties similar to their current scheme. Annual Tax Returns will still need to be filled at year end.
- Have annual gross income under $5 million.
- Use an AIM-capable software system (Xero and Online Version of MYOB) - Be a Sole Trader or a Company (Not a Partnership or a Trust).
- Not have any FIF investments.
If you’d like to know more about this or your other tax options get in touch and call us on 033795338 or send through an email.