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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

Captain
I wouldn't mind the idea if it could be automated somehow with my pay (ie just come out automatically) but otherwise the last thing I need to be doing is submitting tax more often. Too time consuming.

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2 months ago
David Whittall
I pay Provisional tax on my Royal Navy pension from the UK,So I am not a small business. It would be great if I could pay monthly instead of quarterly as it is now. Will this help me.

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2 months ago
Herbert Mues
I'm happy with the status quo. My work is seasonal and income is hard to predict, I don't appreciate more paper work!

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2 months ago
Clare Digby
Yes, sounds better to me if we could pay on a 2-monthly basis when GST is calculated/paid

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2 months ago
Gavin Smith
Not for me, do all my own record keeping and happy with how things are. If it can help others cool but don't make it mandatory.

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2 months ago
Chris Alexander
Keep records up to date to pay GST every two months so what's the difference? Its easy.

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2 months ago
ciaran forrester
no i dont like this idea

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2 months ago
Caroline Stark
Great idea - will make things much easier on smaller businesses

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2 months ago
Hilton Shuttleworth
the present system works better for me.

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2 months ago
DAniel Cattle
Yes I like the idea. At the moment if my income drops I still have to pay provisional tax on last years income plus 5%. This is unrealistic as I am not earning the same amount as the previous year. I also never get the interest back from the IRD for you guys having my money but when there is an underpayment you guys want use of money interest straight away. That is totally unfair. Aim is the way to go for me.

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2 months ago
Jane Shearer
I think this is a very good idea but I would not want to change my systems to use different software. My business needs are met by Excel, it takes me 1-2 hours each month to do all my accounting at present, so a change to a new program for which I have to pay is not very appealing. Why would it apply only for specific software? Surely it would be the business's penalty, as currently, if the numbers are too far out at year end.

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2 months ago
Joanna Harper
Yes

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2 months ago
Jane Shearer
I keep my figures up to date on a monthly basis so would have no issue with the numbers being up to date as long as there was a reasonable year end wash up for depreciation etc.

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2 months ago
Michael Corballis
Not especially helpful to me, since I am semi-retired and my income fluctuates and is unpredictable.

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2 months ago
Janet Danks
I keep my accounting records up to date so no problems for me

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2 months ago
Ian
I am a single dad, I work full time and run my small usiness. I don't have time to update my accounts regularly. It would be tough for me to comply with this requirement.

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2 months ago
Elspeth Goodrick
As a business owner I don't see too much issue with this as I already do GST on an invoice basis monthly. However depreciation on significant assets is only calculated annually and of course the GST return includes capital purchases and sales, which means our "accounting income" is not calculated accurately each month. As an accountant who has previously worked in a CA office who did a lot of GST returns for clients, most were on a payments basis and to work out debtors and creditors on a monthly basis (particularly for clients with large seasonal fluctuations) would add a lot of extra work and expense to calculate the accounting income. In summary as long as such a system is not compulsory for all small businesses it could work for some.

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2 months ago
EricHalfbee
An improvement. It could be just like PAYE. It's a simple calculation. Especially with all the accounting software etc we all use. Provisional tax is a pain in the you know what.

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2 months ago
Moira McKay
Smaller, more regular amounts would be good.

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2 months ago
Debbie Jefcoate
Most accounting software should be able to handle adjustments. It might make sense for the IRD to give businesses the option of Cash basis for income tax purposes if they are cash basis for GST.

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2 months ago
Bruce Richards
For me it will be easy I am a qualified accountant and only work part time. Most people could do simple accounting adjustments based on previous year end eg debtors creditors and stock and then adjust for actual at year end

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2 months ago
Diane Henare
I keep my accounts up to date for two monthly GST now so no extra work. Assume there will be some adjustments at the end of the year for depreciation etc.

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2 months ago
Lynn A
Absolutely, I keep P & L stats each month so it's easy to calculate tax on a monthly basis. This new system has got to be better than the current system because with the current system if we earn an unexpected large amount at the end of the financial year we could get nailed with use of money interest and that can be calculated all the way back to our first installment. Income can be hard to estimate especially for small contracting firms when it's either feast or famine. Hope this helps.

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2 months ago
Joe Clarkson
I don't use accounting software but, as many have said already, those of us who pay gst bi-monthly already keep up to date figures. If these same figures could form the basis of a provisional tax PAYE system, it would work for me. Otherwise I'll be stuck with the cash flow nightmare which is the current system.

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2 months ago
Duncan Ellis
I don't see it being a problem as you need to be up to date for 2 monthly Gst anyway. As stated below as long as there are no penalties for the end of year corrections by our accountants then we are all good.

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2 months ago
Ken Choe
Hard to see it work for small businesses where shareholders' remuneration is not known until after year end, apart from deprn and other adjustments/write-offs.

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2 months ago
Brenda
Yes, this makes way more sense and should tie in with GST returns.

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2 months ago
Brian Rowley
Yes, straight forward for us

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2 months ago
Chad Carter
I think it's a great idea especially with Xero doing all the work. And to have this as an option would help a lot as my business is growing and I need extra cashflow so paying a year in advance doesn't help.

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2 months ago
Adam Leslie
Absolutely I would love this as I file 2 monthly GST Returns so it would be great to be able do this at the same time or at least with a little more certainty!

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2 months ago
jane hocking
Yep, would be great - easy t manage , pay as you go. Easy with Xero software. Yeah!

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2 months ago
Donald Horn
No, the present system of standard estimating suits me fine. I am not a businessman but pay provisional tax. My income is in pounds sterling and therefore fluctuates according to movement in exchange rates. To try to work out effect on a month to month basis would create unnecessary work when the present standard estimating system works so well. I don't mind if the more accurate system is adopted for this who want it but do also leave the present system in place. The three times a year payment system is efficient as far as I am concerned.

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2 months ago
Merrill
Yes I would like to make regular payments of provisional tax. I pay GST two monthly and ideally would like the provisional tax payments to line up with that.

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2 months ago
Belinda Taylor
We are a small business, use Xero, and keep our accounts up to date on a monthly basis on the revenue side, and quarterly on the expense side (fully reconciled). I would support paying actual prove tax in arrears on a quarterly basis -this would be a big improvement on the current system - albeit there would have to be an adjustment for debtors, can't pay it over if haven't received the money. The current system pays the final tax over a year after it is earned, and it takes a very disciplined small business to keep the money in reserve (if prove tax is not sufficient), while also saving the tax on the revenue currently being earned.

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2 months ago
Andrew Cooke
We update sales and purchases weekly, payroll as it occurs, depreciation and GST two-monthly, so that should all be straightforward. However, revenue is "lumpy", and high sales in one month may cover low sales earlier or later in the year. I would be interested to see how "pay as you go" adjustments could smooth this out. I think we'd need to be pretty good at forecasting forward, and that adds a lot of effort that modern tools don't solve.

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2 months ago
Anita
Hi am an IT contractor who works contracts sometimes for 3 months, 6 or 9 months and each and every year is different. This year my contract lasted 4 months instead of the 6 months and my accountant adjusted my May 2016 tax calculation to zero as I'd already paid enough tax from what we'd forecast. I do not want to do accounts daily and I also use the tax savings as a revolving mortgage savings account - offsetting my mortgage payment interest so it works for me to do the taxes once per year. I get how for others they'd prefer to pay in line with the GST cycle, however, I feel that this should not be mandatory.

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2 months ago
Dan McC
Keeping accounts up to date shouldn't be a problem, it happens now, although sometimes it's every two months when gst is due. That being the case the tax calculation will be straightforward it will just require accruals for depreciation.

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2 months ago
Asfar Mian
yes,it is an extra load but worth it.I support it,

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2 months ago
Andy Somerville
No Problem, would love this new method, we use Xero virtually daily thus our accounts are upto date.

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2 months ago
Stuart Taylor
We run a training business where demand fluctuates and do not use accounting software but use a spreadsheet that works well for us and our accountant. We only see the accountant at FY end. We do not withdraw salary/wages during the year but draw on the previous years dividend payout. The company pays no tax with the net profit paid as dividends. We (2) pay personal provisional tax based on the year end dividend. We would prefer to pay monthly as our income varies considerably from year 1 and 2 (high Y1 low Y2) but is very hard to estimate. Monthly would be easier if it is a simple system not requiring any accounting software.

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2 months ago
Dave W
More or less. My accountant keeps my books for me and GST calcs are done bimonthly, so there shouldn't be any problem with PAYE at the same frequency. But the challenge will be the end of year washup, which is when other stuff, e.g. donation receipts are collated. How will IRD handle any discrepancies then???

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2 months ago
Clare Hynd
It won't make any more work as we use Xero to work out our GST. The only problem is that it may not work out the costs of depreciation on assets which affect the final amount of tax that you pay.

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2 months ago
fred foster
Yes would be worth trying there may need some parts to adjust to make it a fair system

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2 months ago
Dale
We use Xero, so have current income/expenditure data on hand immediately. I can't see that there would be any extra work involved, and would make our cash flow easier as we already put money aside as it is earned, but wouldn't have to put unnecessarily large sums aside for the provisional guessing game that it currently is.

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2 months ago
Marian Hlavacka
Yes, it would be a great help paying as you go and don't have a large amount at the end of the year or (3x times per year).

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2 months ago
Duncan Webb
for a business that keeps accurate and up to date accounting entries the ability to calculate provisional tax as you go helps to balance the books. Its a "pay as you earn" for business.

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2 months ago
Kelly Walker
Yes, just as we calculate GST through the year, income tax could be managed the same way.

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2 months ago
Chris parkin
No problem at all.

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2 months ago
Chris parkin
Yes. But should allow for some approximation. Allow inaccuracy of up to 10% say before any penalty applied.

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2 months ago
Jeannette Franklin
I am not a business. But have an over sea income, I think this way would work better for me

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2 months ago
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