AIM - a new provisional tax option for small businesses
From April 2018 small businesses can work out their provisional tax using the Accounting Income Method (AIM).
How does AIM work?
AIM uses new functionality in approved accounting software (Xero, Reckon and MYOB) to work out payments. It will suit your business if:
- your business is growing
- you're new to business
- you have irregular or seasonal income
- it's hard to forecast your income accurately
- you have accounting software or want to start using accounting software
Once you've chosen AIM, you'll only pay provisional tax when your business makes a profit. If you make a loss, you can get your refund straightaway rather than waiting until the end of the year. This will help your business avoid cash flow problems.
Is my business eligible for AIM?
You can use AIM if your turnover is under $5 million a year and you choose AIM before your first provisional tax date for the year. You can’t use AIM if you:
- have investments in foreign investment funds (FIF) or controlled foreign companies (CFC) for the coming year
- are in a year where you’ve changed your balance date
- are a partnership or are trustees and beneficiaries of a trust
- are a Maori authority
- are a superannuation fund
- are a portfolio investment entity (PIE)
If you’re on two monthly GST Returns, you have until 25 June 2018 to let us know if you want to pay your provisional tax this way for this financial year.
I want to use AIM - what do I do?
Bare Bones Accounting offers AIM using Xero. Whether you have your own Xero subscription or you need us to set one up for you, we can have you up and running on AIM within two working days.
We’ll link your IRD number to our tax agency, link your Xero to our Xero Practice Manager accounting software and do all the set up work. When your statement of activity is sent to Inland Revenue on your first due date, they will know you’ve chosen to use AIM for the 2019 income year. You'll also need to send your payment if there is one to make.
Mike says, “AIM is a cash flow game changer - if you don't make a profit you won't have to pay provisional tax.”