Accounting Information Method (AIM) Provisional Tax
April 4, 2019
Provisional tax for income tax works to a similar effect for certain taxpayers as PAYE does for salaried and waged employees. The “standard” method IRD employs takes, for taxpayers whose tax to pay at the end of the year exceeds $2500, the previous year as a starting point. It increases the taxation by 5% and splits the total into three equal instalments (two if you file GST twice a year). Not paying this amount can lead to late payment penalties and, if not paid in full or on time, interest under certain circumstances.
Recognising that this approach does not work for all taxpayers, IRD introduced the AIM provisional tax method. For taxpayers who use a defined accounting system (i.e. Xero or MYOB) they can use the results as a basis for calculating and paying provisional tax based on the year to date profits in the business. This works better for certain taxpayers, especially when results are seasonal or inconsistent.
After a full year of working with AIM we have seen the benefits for those who have adopted it. Although it requires us to assist with its preparation and filing with IRD, please contact us (before filing your first GST return for the year) if you want to consider AIM or put it into place.
Contact us today for your no-obligation consultation.