As part of legislation enacted on 21 February 2017, the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017, a new method for calculating provisional tax was introduced – the accounting income method (AIM).

The new method for calculating provisional tax will be available alongside existing methods – the standard uplift, the estimate method and the GST ratio method. AIM is not replacing these methods.

Under AIM, provisional tax is integrated into business processes and payment amounts are based on current year tax adjusted income. This should provide businesses using AIM with more certainty that they are paying the right amount of tax as it will be paid as income is earned.

Your business might suit AIM if:

  • Turnover is under $5m per year
  • Business is growing
  • Sales are unpredictable or fluctuating
  • You use or want to use accounting software

Some potential benefits:

  • You pay only when you’re making a profit
  • You make smaller, more frequent payments, every one or two months
  • There are no penalties or interest payments if you pay on time and in full
  • You get a refund straight away if you make a loss
  • You square up at the end of the year with no interest
  • You have more time to spend on growing your business
  • Software can do all the calculations for you

The following are not eligible for AIM :

  • Partnerships
  • Maori Authorities
  • Superannuation funds
  • Trusts
  • Portfolio investment entities

 

To find out if AIM is right for your business, get in touch.