The difficulty of calculating provisional tax and fear of exposure to interest for miscalculation has been a major bugbear of businesses. Inland Revenue listened to these concerns and developed the Accounting Income Method, working with key stakeholders including software providers and small business.
The Accounting Income Method (AIM) is part of the wider Inland Revenue (IR) transformation programme to make tax simpler for New Zealanders.
We're combining changes to government policy, new technology, streamlining our processes and reorganising IR so that we have the right people with the right skills closest to the customer.
What is the future of technology?
IR's transformation is re-shaping how we interact with customers in an increasingly digital environment.
Paying tax will become simpler and more certain, with tax processes built around day-to-day business activities, rather than businesses having to build their processes around tax obligations.
Increasingly, services will work better if customers are using software, which communicates directly with IR. Some services, such as AIM, will work only for customers using software.
With more up-to-date information and a modernised computer system, IR will be able to react more quickly to changes in people's circumstances, relating to both their tax obligations and entitlements such as Student Loans and Child Support.
It will also mean that many people — for example salary and wage earners with interest from investments — will not need to have any contact with us, as we will already have all the information that we need.
AIM is one of the first products to illustrate this fundamental change in IR'S approach. Its development is proof of IR's commitment to working differently.
How does the technology work?
AIM is a new way for small businesses to manage provisional tax, using accounting software.
The software takes a business' accounting information and calculates how much provisional tax is due. It automatically makes tax adjustments, and requests relevant data from IR to confirm the business' eligibility, payment dates, period balance and any losses to take into account.
Prompts will be built into the software to help business customers — for example to check something if the software thinks they’ve got it wrong.
The software calculates how much provisional tax is due, and then the business can send the relevant information to IR online, and pay in the usual way.
If profits drop during the year the business can get an automatic refund of overpaid provisional tax, quickly and easily.
AIM will be available from April 2018 for businesses with a turnover of $5 million or less, alongside the three existing options for managing provisional tax.
Business customers using AIM will no longer have to worry about getting their provisional tax right – which will give them more time to concentrate on growing their business.
This initiative was created as part of the Better for Business collective.