Back to Making Tax Simpler
Making payments more often

What will paying provisional tax more often be like?

Businesses using AIM will make provisional tax payments more often.  Provisional tax payments will be made monthly for businesses registered for monthly GST returns. Businesses on a two-monthly or six-monthly GST filing option will pay provisional tax every two months, as will those not registered for GST. Receiving the payments more frequently means Inland Revenue can remove the use of money interest exposure.

We know from previous consultations that being able to pay tax on a more regular basis will reduce this stress, particularly for those in seasonal or unpredictable industries.

How will the option of paying provisional tax more often work for your business?

Comments

Ronise Paul
I think it is unfair that PT has to be paid in advance (before year end), this money can help businesses/self employed people. Obviously those not paying their tax at year end as due will be penalised so paying in advance does nothing except take away from those who are reliable. I don't know of any business who thinks paying tax in advance is a benefit!

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  • agree12
  • disagree5
3 months ago
Brian Mannington
Paying monthly has both good and bad points. We are a manufacturing business that has large up and downs as we may be building for three months before invoicing out. Nowadays not many pay their accounts until the last day of the month if you are lucky, so you are always paying out PAYE, GST, and then the provisional tax before you get paid, so paying provisional tax monthly would load more financing cost . I think the $5m is a good level. Would it be possible to allow companies a 12 month trial period?

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  • agree7
  • disagree2
3 months ago
Brian Mannington
As an importer,exporter,manufacturer and supplier of parts and service, I have yet to find a software package that will do the lot. If there is one would be pleased to find it.

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  • agree3
  • disagree2
3 months ago
Kelly
I'd much prefer to pay as you go. I find provisional tax extremely confusing, the payment dates don't seem logical to me, then there's the crossover with when terminal tax is due. Paying tax for last year and the current year just seems to go on forever.

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  • agree18
  • disagree6
3 months ago
Grant Collingwood
Doesn't help the very small businesses at all. We work to earn money that goes back into the business to build it further, and create enablers that allow us to employ staff or contractors, or to extend our services. If we have to pay as we earn, it means we can't grow the business. Further, our income fluctuates throughout the year. Work done in one month may not be paid for, for several months. We may get a lot of work in one year, but not in others. Further to that, AIM is adding complexity to an already complicated tax system. I would challenge others to do their own tax, paye, student loan payments, kiwisaver deductions, gst, fbt etc instead of leaving it to accountants, even just for a month, and see how complicated it is. Try simplifying things, and perhaps it may result in more businesses paying the correct amount.

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  • agree13
  • disagree3
2 months ago
Amanda
I am an accountant working in business advisory services. I also do our family business accounting. Even I find that all the various tax types make for A LOT OF PAPERWORK! The cost of this in time away from income producing activities or either paying your accountant or a staff member is a big burden to small businesses. If simplification is the idea, how about combining or even eliminating some of these things. FBT and Payroll for example could be combined. We already have GST & Prov tax payable together for GST registered businesses but its the cash flow impact of paying as you go that prevents small business from doing this. I also agree that the payment dates are difficult and could be pushed out to a week into the following month to allow for the fact nobody pays until the last day of the month.

Do you agree with this comment?

  • agree5
  • disagree4
2 months ago
Kelly D
There is already a method to pay Provisional Tax more often for GST payers - the GST Ratio Method. Will that scheme be continued if AIM comes in? GST Ratio Method works well a lot of the time, and is already exempt from Use of Money interest charges.

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  • agree5
  • disagree1
2 months ago
Vivianne Douglas
I prefer to pay provisional tax just three times a year, as this cuts down on my admin time.

Do you agree with this comment?

  • agree5
  • disagree1
2 months ago
Bruce Stone
Paying provisional tax based on accounting profits means you can frequently be paying the tax before you receive payment. How about reverting to a cash model for businesses under $5m, similar the GST payments basis. This would simplify most procedures and mean the software being used will only need to be a cashbook.

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  • agree6
  • disagree2
2 months ago
Andrew Wilson
The key is to be realistic about time frames for business owners to complete financial accounts and to what level of accuracy is required. My view would be that it should be aligned with GST time frames - either change GST to quarterly and make AIM quarterly - then allow enough time for the accounting paperwork to be completed. 20th of the month following would in my opinion place an unreasonable burden. Maybe June quarter completed and paid by the end of August - 2 months to complete all the accounting entries etc.

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  • agree1
  • disagree2
2 months ago
cathy parker
We currently often use tax financing for provisional tax to smooth out cash flows, would this still be available, if not then we effectively end up paying out double tax over the transition period

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  • agree3
  • disagree2
2 months ago
Fred Bauer
As a small business operator, an option for tax payments in arrears under AIM on a quarterly basis would suit me best. That would allow for some smoothing of monthly fluctuations in revenue to costs ratios and avoid tax payments in a bad month following a good one (if calculated and paid monthly). Fortunately, I don't experience whole bad quarters, so that period would work for me.

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  • agree3
  • disagree3
2 months ago
Debbie Dawson
I would be happy to pay two monthly when I do my GST but not more frequently than that because of the other comments that have been made - we all have slow payers who don't pay when they need to even though I diligently send my invoices out on the first of each month.

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  • agree2
  • disagree2
2 months ago
Bruce Miller
There is no disadvantage to me in my business to paying PT every two months with my GST. On the contrary, it would be hugely beneficial to know exactly where I stand throughout the year.

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  • agree4
  • disagree4
2 months ago
Hazel Kirkham
Paying tax as we go would be much better for us so long as the calculation was on a cash basis, like we use for GST, because many of our clients are overseas and payment terms vary, so there is often a long gap between our invoice and the payment appearing.

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  • agree5
  • disagree2
2 months ago
Lorraine Fraser
We would prefer to pay taxes more regularly on a monthly or similar basis as we go - very hard to forecast an annual income for the year ahead, so we always end up paying more tax than we need to. Much easier to pay as we go in smaller amounts, than having three large payments throughout the year - especially as we are only a small business.

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  • agree2
  • disagree6
2 months ago
Chris Hadlee
It will be more work for me to adopt the proposed new system as I prefer to the accounting work all at one time and have sufficient reserves set aside for tax payments. I have no opinion re the proposed $5 million threshold as it doesn't affect me.

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  • agree3
  • disagree2
2 months ago