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Businesses that don't use software

If the option to make payments under AIM was available for those without an accounting software package, what records and processes should Inland Revenue expect to see?

We are interested to know whether small and medium sized businesses that don’t use software could calculate an accurate provisional tax payment using the AIM option. Inland Revenue will develop specifications for what would need to be in place to make payments using AIM. At a very minimum we would expect a double entry system that is reconciled with a business bank account and period end adjustments.

For more detailed policy analysis and feedback opportunities in relation to ability of businesses to use AIM without accounting software click here

If the option to make payments under AIM was available for those without an accounting software package, what records and processes should Inland Revenue expect to see?

Comments

Peter McTaggart
Is AIM a free product or does one have to purchase it and then pay a license. Currently I prepare management accounts and have a very good idea of how much tax I should provide for. Don't like the current method as our busiest months are Jan Feb Mar. Currently I have to increase the provisional payments throughout the year (when we have not earnt the income) to setoff what we earn In Jan, Feb and March. Pay as you earn is always good and would probably help a lot of businesses. It would also help the IRD as they may pay some tax rather than none at all if their business fails.

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3 months ago
Administrator
Thank you for your question as to whether AIM is free. Inland Revenue will not charge for AIM. Some accounting software providers have indicated that they will be integrating AIM into their business accounting products. Elsewhere in the forum we have also asked a question about whether those who do not use accounting software should be able to use AIM (see https://aim.makingtaxsimpler.ird.govt.nz/learn-more-tell-us/businesses-don%E2%80%99t-use-software2/should-aim-be-available-those-who-don%E2%80%99t-use)

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3 months ago
Deanne
I expect that software developers will be inclined to pass on the costs of upgrade to the consumer, which not all small businesses will be able or want to pay for. So I think it would be good to be able to use the AIM method if you run your business with older software (ie not upgraded to cover AIM calculations). If IRD provides a prescriptive method of calculating the provisional tax using AIM it would be successful.

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2 months ago
Andrew Wilson
My view would be that it should make no difference the accounting package - cloud - offline - you essentially should be reporting your current estimated taxable income - same as GST where you provide the required information and pay the relevant tax.

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2 months ago
Justine Cummings
You don't ask for too much evidence of income under the current provisional tax setup, why would you ask for more under AIM? The same level of information requested should be used if a business opts to use AIM to calculate regular tax payments.

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2 months ago
Fred Bauer
I have two small business undertakings. With one I use Reckon Accounts (I guess in a similar category to MYOB) and so software generated reports that gross earnings, expenses and net taxable earnings could be provided to IRD on a monthly or quarterly basis for example, with the external accountant sorting out depreciation and final adjustments in the year-end return. My second undertaking is simple self-employed provision of services, with invoices, earnings and cashbook of expenses all tracked in xls spreadsheets. It would not be difficult to provide IRD with xls generated reports that include gross earnings, expenses and net taxable earnings on a monthly or quarterly basis as above, with external accountant's final adjustments included in the year-end return.

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2 months ago
Paul Dunmore
If you choose to audit the taxpayer, you have the right to see and verify everything. AIM seems no different in principle from allowing taxpayers to estimate their provisional tax, and there are no intrusive requirements around that. I do not see why adopting AIM should compel me to start preparing documentary evidence of the processes that I do for myself. You will presumably have the standard penalty regime for taxpayers who do not take due care with their AIM calculations; that should be sufficient.

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2 months ago
Monique Princen
AIM should not ask for much than what is required for GST reporting. Otherwise, it will be easier to continue using the estimated method and adjust estimates during the year.

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2 months ago
Mark Halls
I am self employed, I do not use accounting software, I do my own GST and at the end of the year every thing goes to the accountant who checks it all and does the end of year return. This system looks to be based and calculated by a relation ship to how much GST we pay so as part of our GST return we would have to be able to show any assets brought during the period that would have to be depreciated (we can claim the GST but the net amount has to be depreciated over several years rather than written off in the year of purchase) or any stock purchased that had not be charged on by the end of the GST period.

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2 months ago
Robyne G
I have been self employed for 16+ years. I have always used, and still do, a manual bookkeeping system. I have always reported my GST monthly. As I see it, the AIM method could easily be tied to the GST reporting as per its periodicity and data. The amount of expenses my business makes to non-GST registered suppliers or for which no GST is payable (eg bank fees)and thus is not included in the GST return, is not great, and if anything would mean my taxable business income at the end of year was a little lower (due to greater deductible expenses) than the monthly GST returns might indicate. So IRD won't be disadvantaged by this if the AIM method based on my GST return overestimates my taxable business income. The AIM method could average out the tax rate you actually paid over the last say 5 years and apply it to the profit earned and as reported in each GST return, and I am sure that as the year progressed, the AIM method could adjust the tax rate applied in that particular year depending on how much the net profit reported in the GST returns was based on. Basing the next year's provisional tax on the last year's income + 5% supposes self employed income just merrily and steadily rises year on year, when in fact it does not and I have found it fluctuates a lot. An accurate pay-as-you-go system would be good.

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2 months ago
Wendy
I would not expect the IRD to require anything more than is currently required for the completion of a GST return.

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2 months ago
Kevin Fellows
I would not expect the IRD to require anything more than is currently required for the completion of a GST return.

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1 month ago
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