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Calculating the tax adjustments

Can the right tax adjustments be made?

Traditionally tax adjustments are only identified and calculated at year end. However, most of the information required is available at the time it is entered into software and doesn’t need to wait until year end. 

We are interested in ensuring there is an agreed way of treating these adjustments for tax purposes. This commonality will improve certainty and accuracy of the calculations. It will also ensure that there is no benefit or disadvantage to taxpayers depending on what brand of software is used.

Do you think it’s possible to make the right tax adjustments during the year to result in an accurate payment of provisional tax?

Comments

Ann Burton
I agree with most that it would be a great step forward but the issue for us how is stock to be taken into consideration - we are a plant nursery and are seasonal. I anticipate lots of tax refunds and 2 or 3 very large payments!! It will be great to see more details as to how it will all work.

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2 months ago
stephanie
yes . Can do

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2 months ago
Jane Dixon
Yes, it'll be possible if Xero can make the correct calculations. I'd love to take the guess work out of the current system.

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2 months ago
Ross Williamson
No

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2 months ago
wendy wiley
yes if xero works this into the accounts i think its great

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2 months ago
RIchard Warburton
I tend to agree with one of Anne Johnstone's sentences: "... but it is unclear whether the use of accounting software is compulsory for this system.....". I use software developed by me which my accountant is happy to use as a basis for my tax returns. Would that be acceptable by IRD under the new plan? I think the new system is a great idea, but only if it doesn't involve disruption to my methodology

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2 months ago
Raewyn
I constantly adjust my provsnal tax each month and use my own spreadsheet data. I don't wait until year end to calculate, however, because we're always playing catchup mode income wise based on yearly projections until the final third of the year, there is no way of being spot on the dollar because our earnings are all overseas based and can't be realised until banks relinquish the funds to us in New Zealand. My final reconciliations take place within 3 weeks as we head into each tax year so clear out any tax liability or refunds by week four of the new year. I don't want AIM for our business.

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2 months ago
Charlie
No, I do not have the expertise to make correct tax adjustments (depreciation, use of home, interest etc) to calculate tax payments during the year, that is what my accountant is for. I keep all accounting for my husbands business up to date every two months for GST purposes only, on industry specific software. I do not know what our income is until the end of the year when the accountant does the books and tells us what our provisional tax payments will be. I would much prefer to pay these payments monthly in arrears than to keep a tax savings account filled for what might be an under or over calculation of tax due, but guess I can't have the best of both worlds.

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2 months ago
.ara Joan Nokomis
i keep my books up to date anyway, & am looking at learning Xero within the next financial year, so feel this would work well for me, being self~employed

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2 months ago
Shirley Vollweiler
It would be good for me - I have a very simple tax situation with no adjustments required, and I'd be much happier paying tax as I earn, more like PAYE, rather than having to deal with provisional tax. (I have sometimes been a contractor paying provisional tax, and other times been a salaried worker paying PAYE.)

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2 months ago
Karyn Flanagan
No, not for me as I am manufacturing and my materials costs would affect monthy figures. I don't have time for the extra paperwork and deadlines.

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2 months ago
Janine Condon
I believe it can be done in part but think that certain ares would still need to be dealt with at year end eg. Depreciation otherwise the additional work required would far outweigh the benefits to our company

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2 months ago
Cristiano Martin
If it was to work as the GST calculation and also at end of the year take into account all the various expenses, depreciation and tax benefit then yes, it would probably save money on accountant fees. If not is better leave the accountant earning his pay.

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2 months ago
Glenda
Many small businesses don't have accounting programs, I can see for small businesses more costs being involved in this change whether it be in additional accounting fees or increased gain/loss of cashflow in the business because the pay to much/little because the understanding of what is required isn't there, or the accountant at year end will spend a lot more time trying to find out what the heck the customer has done in transactions which maybe up to a year old. Small business owners aren't accountants and understanding would be a huge issue to some who don't even operate a accounting program.

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2 months ago
B GORDON
No does not work for us. We are farming and tax is worked out by accountant once they have our "books" at year end.

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2 months ago
Bruce Webster
My experience is that very few users of accounting software get it 100% correct and that while the software maybe robust it is the human input that makes the error which is only picked up at year end. If errors are found at year end how are these corrected and how are the penalties if any applied . The current GST ratio option should be expanded and promoted more , getting in should be made easier

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2 months ago
G. Mason
I agree with Alan Jeffs and Alex Fraser. I am a very small business, I don't use accounting software and only have my accountant do accounts once a year. Every 6 months with GST return would be acceptable, and terminal and provisional tax arrears should be interest and penalty free, as are refunds due to me. Yes it is more work but preferable to having uncertainty and the big black cloud of unknown tax owed. The $5 million threshold idea is fine if you are making that sort of income, I wish I was !

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1 month ago
Jenny Banks
Yes, I think it will be easier for me. I use Xero accounting system, and update it daily.

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1 month ago
Connie Yeung
I believe the new system increase the compliance cost for taxpayer. Also it makes software provider to be monopoly or oligopoly

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1 month ago
Sally
As we are nearing retirement and will work reduced hours in our business, when it suits us, I am very pleased to have this system coming in. It will allow us to work longer without the pressure of unknown tax bills.

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1 month ago
Shirley Wilson
Yes I think it is possible.

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1 month ago
Ella McLean
I am not an active working partner. I receive my accounts from my partner when she balances her books at the end of her financial year. Once I receive those accounts, I need to process them into my annual accounts. All other earnings I pay as I receive the money. I don't know how this would work for farmers. They mostly buy in stock at one part of the year, and sell off at different stages during the year. How on earth do you make an estimate of the end result with such huge variations on a monthly basis. High costs one month, high returns some other time during the year. It would certainly be a great deal more work for my partner, but for me, if I actually received my profit, I would be very happy to pay the tax at that stage, but how does one calculate the value of a piece of property. It goes up and down like a yo yo which has very little to do with the actual farming project itself. After this year once the partnership is dissolved and I am receiving rent, then perhaps this new method would make it easier of me, since I would have a set amount each month to calculate.

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1 month ago
Ella McLean
I am not an active working partner. I receive my accounts from my partner when she balances her books at the end of her financial year. Once I receive those accounts, I need to process them into my annual accounts. All other earnings I pay as I receive the money. I don't know how this would work for farmers. They mostly buy in stock at one part of the year, and sell off at different stages during the year. How on earth do you make an estimate of the end result with such huge variations on a monthly basis. High costs one month, high returns some other time during the year. It would certainly be a great deal more work for my partner, but for me, if I actually received my profit, I would be very happy to pay the tax at that stage, but how does one calculate the value of a piece of property. It goes up and down like a yo yo which has very little to do with the actual farming project itself. After this year once the partnership is dissolved and I am receiving rent, then perhaps this new method would make it easier of me, since I would have a set amount each month to calculate.

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1 month ago
Don Frommherz
While your Department's idea sounds feasible, since your office has many staff with free time, to organize accounting activities. Small business people are usually, flat out attending to all their customers' needs and tax requirements are made "under pressure" . So what AIM will mean is, instead of twice a year "extreme pressure" being turned into 6 or 12 times a year of extreme pressure and longer hours. I start my business from 1 am, 7 days a week and normally only get 4 to 5 hours sleep~ There would be no savings of expenses - just for funding the Crown's accounts. What would be desirable is that a "Trust Bond" be established with your office, in order to avoid Tax Inspections . Using a 3rd party avoids this ominous risk. Funding a 3rd party, does cost a small business far too much :( Perhaps, there can be an option, to try out AIM and if not suitable, return to the present system

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1 month ago
Lisa
This would certainly help us!

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1 month ago
Ian Chapman
Yes. Very easy as I keep my records up to date every 2 months for GST. AIM will be a huge help to me.

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1 month ago
Nicola Wynne
Yes, I would be happy to do this. We use Xero and as they will construct something similar to GST generation it won't be hard. As commented by another there will be an end of year washup on balance sheet figures that are not generated during the year - I wouldn't like to think we would get penalties over these.

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1 month ago
Nicola Wynne
No it won't be possible for us. balance sheet info is not generated until the year end in the most part. It would require a lot of extra work which I don't have time for. For example - one would need to stock take and calculate Work in Progress each time - who has time for that? In my opinion there is also no point spending time guessing figures for these - most small businesses are time poor and I have plenty of real things to do - without wasting time on imaginary things.

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1 month ago
Chris Grant
We run an accounting package and are processing data on a monthly basis which is far easier than the box to the accountants at the end of year. We would have to ensure that we maintain our accuracy. I see this as a good thing. we have grown steadily for a number of years and provisional tax has always been a problem in estimating our profit for year to year.

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1 month ago
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