Inland Revenue's new Accounting Income Method now has plenty of early adopters and now the focus is on improving the product for year two.
The Accounting Income Method (AIM) is a new provisional tax method for small businesses with an annual turnover of less than $5 million. The pay-as-you-go method means businesses only have to pay provisional tax when they make a profit.
More than 1000 businesses have signed up as ‘early adopters' to AIM so far. Inland Revenue customer segment leader Richard Owen says those early adopters are at the forefront of technological changes designed to make tax simpler.
“We're grateful to all them for putting in the time and effort to lead the way and feel confident that their early investment will already be paying off. Their feedback will not only help us and the software providers improve AIM but will also attract many more to it in the coming years," Owen says.
Whanganui firm Prue Anderson Accounting is one of AIM's early adopters. The firm's office manager, Sandy Sloan, says the company is quick to welcome modern accountancy.
“We want AIM to be successful since a pay-as-you-go system for provisional tax is better for most customers and takes the stress out of taxation,” Sloan says.
“Even though calculating shareholder salaries in the first AIM return was a bit of a challenge, there were no nerves in our office about using AIM and we think the majority of eligible provisional taxpayers should embrace it."
“The big test will be at the end of the tax year where we expect our clients will avoid a big bill in the end of year wash up," Sloan adds.
Inland Revenue realises that although many businesses are interested in AIM, few have the resources to become early adopters, Owen notes.
“Ask any small business owner whether they would like to take the guesswork out of provisional tax, have less exposure to the penalties and interest system and no big tax bill at the end of the year, then you have normally done enough to pique their interest,” he says.
“What we've always known though is that few want to be early adopters. Many small businesses don't have the resources to trial every bit of new technology that comes to market.
He believes that small businesses would rather wait and see what their peers think about AIM before deciding whether it's worth a try.
Registrations are now closed for the current tax year but newly established businesses can still join AIM at any time. A bill currently before parliament proposes a change to allow existing businesses to join at any time during the tax year.