Pay-as-you-earn tax (AIM) – what does that mean for you?
From April 2018, small businesses, sole traders and contractors can choose a new pay-as-you-earn option, rather than paying provisional tax in instalments several times a year.
The IR are introducing the Accounting Income Method (AIM) so you can pay tax based on the profit in your business during the year. This aligns with the GST monthly or two monthly periods and has been introduced so you can pay your tax based on what your profit is, rather than being based on the previous years profit or estimated current income.
AIM is optional and will suit businesses who’s income fluctuates or is seasonal during the year. It is only for those with an annual turnover of less than $5m. Make sure you talk to your adviser to discuss whether it is the right choice for your business. As your income fluctuates, so does the tax you have to pay. If your income falls during the year you could even get a refund.
This is all well and good, but what does it actually mean in terms of small businesses and any changes they may need to make?.
It will mean you need to be using software to track your day to day financial data – ie Xero, MYOB Accountright or Essentials, Reckons APS software .
To able to file an AIM statement of activity return, there are many adjustments that will be required, for example adjustments for private expenditure, trading stock, accounts receivable and payable, deprecation including losses and recoveries, provision adjustments and livestock adjustments. This means your accountant is going to need to be fully involved with the AIM return, so ensure you chat with them before opting into the scheme.
To opt in you only need to file your first AIM return. This is due 28th May for monthly GST filers, and 28 June for two and six monthly GST filers, and those not registered for GST. This only applies to businesses with a standard March balance date.
Further information can be found on the IR website
At Ontrack Bookkeeping, we are fully set up for this, so if you would like to discuss this, please contact the team