AIM could be helpful

If you have seasonal income or will pay more than $60,000 of tax in the year, the new Accounting Income Method (AIM) could be good for you.

From 1 April 2018 you’re going to be offered another opportunity to avoid the interest charge on the shortfall of your provisional tax. If you use accounting software approved by Inland Revenue, you may be able to calculate and pay your tax on a two-monthly basis in tandem with GST. Provisional tax will no longer apply to you. If you don’t pay GST, you can still use AIM.

You will need to make several adjustments, but these are not difficult. Those who wish to use the new system will need to notify Inland Revenue before the beginning of the financial year for which they wish to use it. We recommend checking with us, first.

The following adjustments will be required for each return:

  • Private expenditure included in business payments.
  • The stock adjustment is perfectly easy. We won’t detail it here.
  • If you’re on a payments basis or not registered for GST, you don’t need to adjust for money owing to you and money owing by you (accounts receivable and accounts payable).
  • If you make losses, these are adjusted period by period so you don’t have to pay any income tax until they are used up.
  • You can choose whether or not to adjust for depreciation, but you must conform with the IRD depreciation rules if you decide to claim a deduction for depreciation.
  • There are special rules for livestock.