MathildaRock
  • Home
  • About
    • Biography
    • How we differ
    • Working with us
    • Wins and successes
    • Media
  • How we help you
  • Resources
    • Business >
      • Business Insights Blog
    • Creative Industry >
      • Women in Film and TV (WIFT)
    • Adaptive Accountant >
      • CARING
      • Conferenz presentation
  • Contact

Taking AIM - the new option for provisional tax

5/12/2018

0 Comments

 
I'm not a tax accountant but I was very interested to read up on the new provisional tax option for NZ small business, called AIM: Accounting Income Method.
After sitting through three hours of - actually quite interesting - IRD webinars, I was able to determine a number of items that I felt small business owners should be aware of when deciding whether to adopt the new option or not; items that might not be covered by other advice or guidance.
On the whole, I liked the new option. It makes paying provisional tax part of everyday processes as it is paid to the IRD along with GST. 
My initial concern with it was that provisional tax will be calculated on the profit showing in the business's accounting system at that point in time and I had experienced something similar before.
Picture
Financial accounting, by its nature, contains lots of transactions that are not used to manage businesses and which occur at the end of the financial year. Most of these transactions are expense-related and have the effect of reducing year end profits. Regular provisional tax paid on profit values at the time of filing can cause the business to overpay tax. By the time the annual tax return is filed (and with a tax agent that can be up to 12 months AFTER balance date), any refund can be delayed by many months - cash that might have been needed by the business but was held in the IRD's bank accounts.
I had seen this happen to a business, when for at least two years it had tax refunds due which its accountants did not calculate, process and file for several months after its year end.
Having listened to the IRD webinars, I was pleasantly relieved to discover that the AIM software had the ability to allocate some of those adjustments at more regular intervals than just at year end, thereby creating a more accurate picture of profits for businesses and not trapping overpaid tax. Phew.
So, it was looking good. Then I discovered something that I hadn't expected.
​
​The goal of making the new AIM option available in this was was to give business owners more control over their tax commitments and make it part of everyday bookkeeping.
But only one of the three approved software suppliers - MYOB - was making the additional software needed available in its general business accounting packages.
The other two - Xero and Reckon - was ONLY making it available in their Tax Practioner software packages.
And that means, that if you use Xero or Reckon and you want to take advantage of the new AIM option, you MUST engage the services of a tax agent - i.e. a bookkeeper or chartered accountant. And with that comes extra cost.
If you use Reckon or Xero and you feel capable enough to be able to use the new AIM option, your only path is to contact your software supplier and ask if they are going to make it available to businesses without tax agents any time soon.
0 Comments



Leave a Reply.

    business insights blog

    Find useful info to help you understand more about your business, its accounts and finances.

    Categories

    All
    Accountants
    AIM
    Bookkeeping
    Business
    Cash
    Cashflow
    Double Entry Bookkeeping
    Financial Accounting
    Graduates
    Literacy
    Management
    Management Accounting
    Myob
    Numbers
    Numeracy
    Processes
    Profit And Loss
    Provisional Tax
    Reckon
    Statistics
    Tax
    Xero

    RSS Feed

Powered by Create your own unique website with customizable templates.
  • Home
  • About
    • Biography
    • How we differ
    • Working with us
    • Wins and successes
    • Media
  • How we help you
  • Resources
    • Business >
      • Business Insights Blog
    • Creative Industry >
      • Women in Film and TV (WIFT)
    • Adaptive Accountant >
      • CARING
      • Conferenz presentation
  • Contact