Provisional tax is about to be made a whole lot easier for small businesses.
Inland Revenue is urging businesses with annual turnover under $5 million to talk with their accounting software provider or tax agent about a new option that allows them to pay provisional tax only when they are making a profit.
The Accounting Income Method or AIM makes managing cash flows simpler because provisional tax payments are based on the business’ actual results.
Inland Revenue’s Deputy Commissioner for Transformation Greg James says IR has created a product that takes the guesswork out of provisional tax payments.
“At the moment businesses often have to take a stab in the dark about their projected earnings for the current year.
“When that’s off the mark, it can lead to either an overpayment of tax and a long wait for a refund or an underpayment and a penalty charge.
“The beauty of AIM is that your tax payments are in line with your business cycles and if you go into loss you can collect your refund of overpaid provisional tax immediately.”
A series of webinars are being hosted to talk through the benefits for small businesses and explain how it all works.
Three accounting software providers will be offering AIM as part of their package – MYOB, Reckon and Xero.
“You don’t have to be a tax genius to make the calculation,” Mr James says. “The accounting software does all the work.
“We think this could make life easier for tens of thousands of small businesses but now is the time to check if it suits your circumstances. We suggest they talk it over with their tax professional or software provider.”
Find out more and sign up for an AIM webinar at www.ird.govt.nz/AIM
Media contact: Baden Campbell 029 890 1674