New provisional tax method – AIM (Accounting Income Method)

You may have seen Inland Revenue promoting a new provisional tax method called AIM (Accounting Income Method)

For those of you using Xero, MYOB or APS and are currently a provisional taxpayer, from 1 April 2018 there is another option for meeting your tax obligations, and staying on top of cashflow.

‘AIM is the GST Ratio Method on Steroids’

This is a method highly suited to taxpayers who have irregular cashflow during the year and would like to better manage their income tax obligations.

 

How it works:

Using your AIM-capable software, you can pay provisional tax based on a snapshot of your current year to date performance. This is aligned with filing of your GST returns (2 monthly or one monthly) – both are done at the same time to keep peace of mind relating to your tax affairs and reduce compliance costs. All those fancy year end accounting adjustments can also be included, including home office claims, and shareholder salary provisions.

Benefits:
  • Opting in is simple and easy and helps maximise to power of your software to do the work for you regarding your tax compliance.
  • Entering in to the regime may reduce exposure to interest and penalties with Inland Revenue, reducing the risks around failure to meet tax obligations due to cashflow constraints.
  • Provisional tax is better aligned to your cashflow – where your income drops, your income tax obligations also decrease.
  • Enable a more streamlined approach of income tax payments around related parties, and their tax obligations. Shareholders will have the ability to have their tax obligations paid on their behalf by their company, particularly where they usually receive shareholder salaries.

 

If you would like to learn more, give us a call to talk to one of our friendly team, or your  client manager.

Call us on 04 3853343 or email accountant@ilumin.co.nz