Date: 19th April 2018
The new financial year brings with it a new option for paying provisional tax, the Accounting Income Method (AIM). This new ‘pay as you go’ income tax method is a game-changer for cashflow management because your provisional tax payments (or refunds) will match your actual income earned (or loss incurred) in each GST period.
Could AIM hit the spot for your business?
AIM uses new functionality included in your Xero accounting software to work out payments. It will suit your business if:
Once you’ve chosen AIM you’ll only pay provisional tax when your business makes a profit. This will help you to avoid cash flow problems.
As long as you make your payments in full and on time, there is no exposure to use-of-money interest. If your business makes a loss you can get your refund straightaway rather than waiting until the end of the year.
You can continue to use another provisional tax option if you think your business won’t suit AIM.
Your business can use AIM if:
In order to opt-in for AIM in 2019 financial year, your first AIM return will need to filed and paid by 28 June 18 (or when the first GST return of the new financial year is due). At this stage, Inland Revenue is only accepting AIM returns from approved software such as Xero Practice Manager software, meaning that your accountant will need to file the return on your behalf. Xero has said that once the finer details have been ironed out, they will be offering AIM to all Xero users.
If you think AIM could be right for you, get in touch as soon as possible and we’ll talk you through the options.
Take a look at the IRD website