Inland Revenue is making provisional tax simpler for New Zealand small businesses through the Accounting Income Method (AIM). Now in its second year, AIM allows business owners to pay a tax bill only when they’re making a profit.

Under the previous rules of provisional tax, payments must be made three times a year and in equal amounts. As most businesses don’t earn their income equally across the year, this can cause strain on the business’s cash flow if taxes are paid earlier than profit is made.

AIM does not replace existing methods, but is available alongside previous ways of paying provisional tax. It is currently provided through three accounting software providers and aims to take the guesswork out of provisional tax by using a business’s real-time account information. This can then provide them with more certainty that they are paying the right amount of tax at the correct time. AIM also reduces a business’s exposure to penalties and interest on provisional tax.

AIM is currently provided as part of software accounting packages from MYOB, Reckon and Xero. To find out whether AIM will assist your business, speak with your accountant or tax agent.