Inland Revenue's new new provisional tax option, the Accounting Income Method (AIM), is being well received, as small business owners look to take the 'guesswork' out of provisional tax.
Oamaru accountant Adair Craik, who has more than 50 clients signed up for AIM, says the solution is proving to be a real advantage.
AIM requires small businesses to make provisional tax payments only when they're making a profit.
“I've got retailers, manufacturers, panel beaters, moteliers, professional athletes and a hot rod restorer all using AIM," says Craik.
“My clients always know where they stand and can make better decisions about how to manage their money rather than having to estimate how much to keep aside to cover the provisional tax bill," she explains. "AIM takes away that element of surprise and my clients like that.
AIM is currently provided through three accounting software providers as part of their package. This means provisional tax calculations can be made using real-time financial information.
“It's great for instilling financial discipline and it's helping my clients stay on top of their debts and have a better view of their cashflow,” says Craik.
Richard Owen, small business segment leader at Inland Revenue, says the experience of Craik in Oamaru will be familiar to small businesses elsewhere in the country.
“More businesses are opting to take the guesswork out of provisional tax in favour of the greater certainty that AIM provides," says Owen.
“That's particularly useful when a business is growing fast and needs to know where they stand," he says.
“We recommend any business finding they don't have the cash to meet their provisional tax obligations should talk with their tax professional about whether AIM can make life easier,” says Owen.