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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

AJM
No extra work, good idea , but have lower threshold so this sensible approach can apply to more businesses.

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2 months ago
Adam Buczynski
It may be hard to get 100% accurate tax figures at any given moment in time, because some data can only be known at the end of the year. However, as long as the periodic data is reasonably accurate and covers all the "known factors" like income, expenses, interest earnings, etc. I don't think it should be a problem to collect these data and pay provisional tax based on those data. Once could then file any corrections if needed at the end of the year, once all data is known.

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2 months ago
Hayden McCall
Adjustments are made on an ongoing basis around monthly payment and invoicing cycles, and from a tax perspective around GST returns. Often these are retrospective business decisions resulting from negotiations with customers and suppliers where disagreements have arisen and the negotiated outcome varies from what has been loaded into systems. Changes are frequently outside of the current accounting period, and may not automatically flow into current period tax accounting, so a process to allow for manual adjustments will always be needed.

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2 months ago
Traceylee
We use Xero and so all of our account info is pretty accurate and up to date. As we are a business that operates with accurate forecasting paying provisional tax according to up to date information is surely better for our business?

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2 months ago
Alan Roberts
Yes

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2 months ago
Abbey Chisholm
This will work for our small business - we use Xero and load all invoices plus create sales invoices in the system so will be easy to track. Much nicer to have more small payments as provisional tax is always a bit of a blow to the bank account, and if calculated wrong, is particularly difficult at year end for a relatively new business

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2 months ago
Bronwyn Anderson
As a sole operator I find I earn around $120,000 max a year and the current process is crippling me. I would prefer to have the extra workload providing it is not too onerous and pay as I go thank you.

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2 months ago
Alex Korban
Yes, I think it's possible to make adjustments during the year, and the benefit of paying tax on real rather than imagined income far outweighs the costs of keeping the accounts up to date. While I believe that tax should be paid after the end of a tax year, with no system of provisional tax at all, paying provisional tax based on real income is still a step forward.

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2 months ago
Chris Clarke
Admin takes up too much already, this just adds to the burden & would be avoided is possible.

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2 months ago
Cathy Ardern
Yes, this will be no trouble at all and in fact our business has been paying provisional tax by the % ratio method for quite a long time ie Provisional Tax is paid every two months with our GST payment. It is an excellent way of paying Prov. Tax because there are no surprises at the end of the year, and it is a fairer way also...."pay as you go"

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2 months ago
David Wallace
no it will be no extra work, however the option needs to be available regardless of the general ledger system used

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2 months ago
Andrea Fowler
Hi I think this would be a good idea and more fair - if you are using an accounting system to track revenue and expenses then I don't think it will be much extra work as it needs to be up to date for GST calculations anyway. thanks Andrea

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2 months ago
Hikitia Ropata
Yes. I think it will make life easier.

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2 months ago
Debra Chantry
Hi, Yes it makes a lot of sense to do it throughout the year.... why wait until the end?

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2 months ago
Douglas Garrett
It would be too much extra work and cost for my small business.

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2 months ago
Peter
Totally agree with this concept - my company uses Xero which keeps very accurate and up to date records.

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2 months ago
Karen
I use MYOB so everything would be up to date. My only concern would be whether depreciation was taken into account

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2 months ago
Greg finlay
No . The majority of taxpayers do not have the skills to accurately calculate the tax There needs to be an tolerance level , an incentive and an annual square up with a tolerance level . All this can virtually be done now with voluntary payments from gst returns. I am concerned that comments are also vetted. Censoring sets a dangerous forum.

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2 months ago
Neil Percival
Yes, no problem for us.

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2 months ago
Belinda Willis
Yes I think this is fabulous - I often get caught out by big tax bills

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2 months ago
Jane Stevenson
Yes I think it is possible and much more preferable to the current provisional system

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2 months ago
Doug de Wit
I agree with aim, no extra work for using Xero. Prefer to pay as we go.

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2 months ago
Fulton Ross Team Architects
Yes, we have an MYOB Accounting Package and would find this way of paying provisional tax excellent

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2 months ago
Jeff Faulke
Absolutely it would be great

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2 months ago
Donna Blaber
Yes

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2 months ago
Tracey Anderson
It will encourage particularly small to medium businesses to keep their records up to date, and if that places too much stress on the business owner/tradesman, then they could employ the services of a bookkeeper to keep their records straight while they carry on with what they do best. This tax method can only be positive as invoicing will be done promptly, performance can be analysed regularly during the year, and accurate tax payments can be made which do not involve crystal ball gazing. All for it!

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2 months ago
Robert Cameron
I already calculate my likely tax/provisional tax obligations on a monthly basis and make payments two monthly on that basis - I just use a spreadsheet - not formal accounting software

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2 months ago
Doug
Can't calculate tax accurately because of depreciation, an annual wag up will be needed for this and other reasons. Will be close enough to proceed, will be better than current system.

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2 months ago
Nicola Graham
I always have my monthly accounts up to date so being able to pay provisional tax based on these is a much preferred method for us.

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2 months ago
Dianna Behrns
No, I don't think we can make the RIGHT tax adjustment during the year but I think the idea of being able to make more regular provisional tax payments is a good idea. I just don't think we should be penalised if the calculated amount is not correct. That is our accountant or tax advisors job to do when they do the end of year accounts and it puts stress on a business knowing that you might get penalties for getting it a bit wrong.

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2 months ago
Christine Flynn
As I have changed over from Banklink to Xero in the last 6 Months I all sounds I would be the ideal way of paying tax for my Business

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2 months ago
Rachel
Most smaller to medium size businesses use computer software for accounting records and should be able to print fairly good reports that reflect their profit. Some taxpayers may need help from their accountants to estimate other end of year tax adjustments like depreciation, interest on loans, stock adjustments etc if they are not already recording these items. I think it's an awesome idea to pay as you go for seasonal businesses based on your level of income. Our business is very seasonal with earthmoving in Northland and we have very little income in winter & spring when tax payments are due and cashflow is scarce. The AIM method would really help.

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2 months ago
CALWANT SINGH
We already have the ability to work out our surplus each month by the end of the following month

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2 months ago
Cathy Parker
In general yes but there are some that can only be made easily at year end

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2 months ago
Kennedy Faimanifo
If were constantly paying a specific amount out of every pay then the tax would always be accounted for.

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2 months ago
Alan Liddell
Yes, it is possible

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2 months ago
Barry & Sullivan Electrical Ltd
I totally agree with this proposal & in fact have been calling for this for a number of years.

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2 months ago
Jeff Stagg
No. You need to consider all aspects of the accounts including depreciation to do that and this ion only done at the year end.

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2 months ago
Patel Bharti
No It will not be easy for me to keep account up to date during the year. Also it will be not possible to guess the actual income as you go.

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2 months ago
Lisa McCormick
1. We keep our records up to date and pay taxes bi monthly so our systems already cater for this. 2. $5 million threshold does seem fair, as then you would no longer be a small business and systems would change

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2 months ago
Rachel
It is possible - but may include help from your accountant if you don't have those skills. Using last years financials to help estimate depreciation, interest, stock etc would help.

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2 months ago
Daphne Burrows
Yes I do

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2 months ago
Gordon McGregor
This would not be a problem as we update our accounts on a monthly basis in any event so that we can review performance and plan ahead.

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2 months ago
Barry Holland
I think it is possible to keep figures up to date to enable an accurate assessment of provisional tax throughout the year. I do however, think that Provisional Tax is an unnecessary burden on small business/sole traders. It is also inconsistent with many other economies around the world and is anti competitive and stifles business/trading growth.

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2 months ago
Erin M
this to me makes much more sense and should be manageable for most businesses, especially if the threshold is set at $5 million, most companies of this size would be running accounting packages that could handle this method

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2 months ago
DC
Yes I think it's a good idea to be able to opt into this, but for any size of business and self employed....e.g. from small incomes to large ones.

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2 months ago
DAvid Quinn
I think in most cases packages like XERO and MYOB will be fine for most small businesses. Small businesses will still have an adjustment at the end of the financial year when their Accountant does depreciation adjustments and other accounting adjustments but for most businesses I would think that they would get close to paying the correct amount of tax some may over pay other under pay but that is no different than under Provisional Tax now.

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2 months ago
Frank Moes
I agree it is possible to make the right tax adjustments during the year.

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2 months ago
Nicolaas de Waal
Will keeping your records up to date during the year be too much extra work for you? We have to update our records every 2 months for purposes of calculating GST. Therefore it is no extra work, as long as the IRD calculate the provisional tax AFTER the due date of GST return, and using the same period as the GST return. Should any business be able to use AIM? Is a threshold of $5 million fair? Yes, agree on both

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2 months ago
Carine Drent
Yes - i think that will be great idea with better cash-flow control in our medical practice

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2 months ago
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