A key principle of the tax system is taxpayers should pay tax as income is earned. That doesn’t work well for businesses with seasonal or volatile incomes, and is why the Government announced, early this year, a new method for paying provisional tax.
The Accounting Income Method (AIM)
More and more small and medium enterprises (SMEs) have digital accounting systems for better business decisions. Integration between accounting software and IRD’s systems and processes is happening. SMEs use tools like these to track how their business is performing. This same information can, therefore, also be used to make provisional tax payments on an actual results basis. Businesses make provisional tax payments in most cases six times a year at the same time as GST payments, or monthly for those who file GST returns each month. The payment is based on the results achieved in that tax year, matching payments to cash flows as closely as possible. AIM will help new businesses pay tax only on results they achieve. The same goes for businesses with seasonal income – because tax payments adjust to the season, as well.
Contact us if you would like to know more on the new method of paying provisional tax.