Pay as you earn tax – the latest change to the NZ income tax system
As part of the simplification of the NZ tax system, April 2018 sees the introduction of the new Accounting Income Method (“AIM”) for businesses. This method will be available to many small/medium businesses and means they can take a pay-as-you-earn approach to provisional tax, rather than paying provisional tax instalments several times a year. This means small businesses can pay provisional tax based on their cash flow, rather than previous years earning or estimated earnings for the current year. By using suitable accounting software such as Xero, your accounting software will calculate how much tax to pay in line with each GST period.
This new method will not suit all businesses, the more adjustments required at year end, the less likely this method may be beneficial however if could be well worth looking in to for your business.
Please contact the Team at Walsh & Associates if you would like to explore this option for your business. Further information can be found on Inland Revenue’s website http://www.ird.govt.nz/news-updates/accounting-income-method-prov-tax.html