Most business owners are provisional tax payers, meaning that you pay PROVISIONAL tax during the financial year in August, January in May. Thereafter, IF your business performed better than last year and you made a whole lot more money, you pay TERMINAL tax the following year in April. Alternatively, you get a refund.
Now IRD is always trying to find ways to get their tax money sooner.
The latest development is the AIM method, to be rolled out in April. The AIM method is not compulsory but could be beneficial for some businesses.
In very simple terms, The AIM method, which stands for Accounting Income Method, works similarly to your GST returns. You calculate and pay your tax on a monthly or 2-monthly basis. As simple as this sounds, you must prepare calculations to ensure you are not overpaying, for example your depreciation, private use, debtors and creditors and trading stock calculations to name a few.
Don’t get me wrong, I am all for better and simpler ways of doing business. And if the AIM Method proves to work I will be recommending it to some of my clients who it would be suited to. At this point, not all Accounting Software Packages have the AIM functionality. However, I am sure this will be rolled out over the next months.
Please contact Annè if you would like to know if your business is suitable to use the AIM method and more importantly if it is beneficial for your business.