That being said, Inland Revenue are introducing a new method of meeting your provisional tax obligations. The idea behind it is to calculate and match a New Zealand taxpayers income tax payments with their profitability.
I need to point out that, although there are some major benefits to this new system of paying provisional tax (AIM), we do offer an even better method.
However this blog post is for the benefit of the general public rather than our clients who would have been offered the benefit of our NZTaxAngel service. Of course, you should always contact us if you would like to see how we can take the burden of your New Zealand provisional tax payments away from you!
How Inland Revenue expects you to pay your provisional tax at the moment
At the moment, small businesses and the self-employed are still swimming upstream in a dated and inflexible provisional tax regime. We all know how difficult it can be to “guesstimate” our trading results a year in advance. And then, based on that forecast, to try and squeeze two or three provisional tax payments out of the cash flow, even if business is poor. Not to mention the effort of requesting payment adjustments, also having penalties and interest hanging over our heads.
The new Accounting Income Method (AIM) of calculating provisional tax
Modern technology has brought enterprises much closer to their numbers. Nowadays, owners and their accountants share instant access to fresh info. Results are available on demand, without much effort.
Inland Revenue has introduced AIM so that technology can do the heavy lifting in terms of our provisional tax compliance activities.
From next year onwards, businesses with annual gross income of less than $5 million, can enjoy the benefits of AIM, in the following ways:
- AIM integrates with your accounting software to do the calculations for you
- simply pay over provisional tax, together with your GST, every second month
- AIM uses real results (not forecasts) for calculations, therefore, no profit, no tax
- real numbers sync your tax payments better with your cash flow
- if your income drops and you’ve overpaid tax, then Inland Revenue refunds you (a bit like the GST system)
So, while we excitedly count off the months until AIM kicks in, why not check in with us to make sure that it’s all systems go on the big day or discuss our better alternatives?
The information in this article is indicative of NZ tax rules and changes and not intended to be complete for all intents or purposes and does not constitute advice. It is recommended that you obtain professional advice, suited to your particular circumstances, from us before acting on anything you read.