It’s sometimes rare for the public and private sector views on business (and tax!) to align.

However, Xero and the NZ government acknowledge the importance of small business to the NZ economy and also the technology changes that small business is adopting.  Here’s an excerpt from the recent IRD discussion document:

“The AIM measure announced by the Government proposes that accounting information prepared by a taxpayer for a period, be used as a basis for calculating the tax liability of the business for that period. The resulting amount would be payable by the taxpayer as a provisional tax instalment.

AIM payments will be generated by the accounting software and authorised by the user, whether a business or its advisors. The user will confirm the amount to pay and then activate the payment for both GST and provisional tax. The calculation and payment of provisional tax will become part of running the business instead of an extra process.”

The IRD goes on to list the types of businesses which will suit this new system, which should be available from 1 April 2017, and the types of business it will not suit:

AIM may suit:

AIM may not suit:

What does this mean for you?

It means that if you use Xero, you can calculate your Provisional Tax with more accuracy and you can pay your Provisional Tax when you pay your GST.  If your income drops in the following period, you can claim your provisional tax back, just like a GST refund.

It will take the sudden tax shocks out of small business life and put you in better control of your finances.

Franchise Accountants are a huge fan of this kind of simplicity for small business and we’re a big fan of this change as we’ve seen the problems created for small business when there are unexpected, or unexpectedly large, tax bills.  With this AIM model, new businesses won’t get slammed with the ‘double whammy’ in the second year in business (when two years tax is payable in one year).

Our existing clients know that if they have an problem with Xero, they simply call 0800 555 8020 and we’ll help sort it out.

How easy is that?

We’d love to hear what you think of the new AIM model and the impacts it will have on your business.
Drop an email to philip.morrison@franchiseaccountants.co.nz