From 1 April 2018, small businesses with a turnover of less than $5 million a year can work out their provisional tax using the accounting income method (AIM).
AIM uses new functionality in approved accounting software to work out payments. It will suit businesses that have irregular or seasonal income and have accounting software or want to start using accounting software.
Businesses can continue to use another provisional tax option if they prefer.
Those businesses that do choose to use AIM will only pay provisional tax when their business makes a profit, helping with cash flow.
If payments are made in full and on time, there is no exposure to use-of-money interest. Businesses that make a loss can receive a refund immediately rather than waiting until the end of the year.
To choose AIM, complete the set up in your software. You are required to opt into AIM at the beginning of the tax year before your first payment would fall due.
For new businesses and those new to paying provisional tax, you can opt into AIM anytime before your first payment would be due.
On your first due date, you must send Inland Revenue your statement of activity through your software and send your payment if there is one to make.
AIM is not available for a transitional year or if you are a partnership, portfolio investment entity, super fund, trust or a Maori authority. If you have foreign investment funds (FIF) or controlled foreign companies (CFC) attributed income you are also excluded.