May 2018                                                                                                                                              



The IRD are making progress with their software "transformation" your MYIR area now (as of a couple of weeks ago) has a "business" tab rather than a "GST" tab as various further tax types have been transitioned to their new software.


Through the "business" tab you can now access information and file returns etc for

-          Goods & Services Tax,

-          Fringe Benefit Tax,

-          Resident Witholding Tax,

-          Dividend Witholding Tax,

-          Non Resident Witholding Tax,

-          Approved Issuer Levy,

-          Gaming Machine Duty.


It is of course another learning exercise to find your way around the new software layouts, but with a little familiarity hopefully it will prove better than it was before, there is definitely much more ability to file and make changes online.


PAYE was regarded as a bridge too far for transitioning this year, after GST last year, and has been deferred for a year. Presently PAYE communication with IRD is unchanged but the requirement for payday filing will be mandatory from April 2019 for employers accounting for PAYE and ESCT of over $50,000 per year. (Payment timing doesn't change).

2. Accounting Income Method "AIM"

  • Introduction

This is the other big change coming this year.

It is a new way of paying provisional tax through the year based on your actual income for the year to date.


Make more profit pay more tax, make less profit pay less tax and if you have overpaid earlier in the year the IRD will pay refunds. In theory at the end of the year the business will have paid the right amount of tax.


There are adjustments required for each pay period to ensure that the income for the period is calculated on a consistent basis to the year end accounts.


These regular adjustments may be too much of a hassle for some businesses, but the IRD are being pragmatic about this. The phrase "near enough is good enough" was used in a recent IRD seminar.


Presumably significant understatement of income during the year can be fairly readily picked up when the year end result is known and explanations required for any significant full year variation.


  • Eligibility to use AIM

AIM will not be available to businesses identified as having used AIM to inaccurately assess its tax liabilities.


AIM is also not available to the following entities:

-          trusts,

-          partnerships,

-          taxpayers who have foreign investment fund investments*,

(*broadly share investments outside Australia and NZ)

-          Maori authorities,

-          Portfolio investment entities,

-          Superannuation funds.


To be eligible to use AIM a business must:

-          have a turnover of less than $5 million per annum,

-          file under AIM from the first payment date for the financial year,

(either 28 May or 28 June see below)

-          use Xero, Reckon or MYOB (AIM capable) software.


  • Software

The Xero and Reckon client accounting packages do not have the ability to file AIM returns. This seems to me like a whoopsie by these two software firms whatever the good reasons may be!


Strangely and sadly both Xero and Reckon AIM returns need to be filed through their Tax Management software which generally means it will need to be filed by the tax advisers or accountants for those businesses.


  • Timing

AIM filing and payments are due on GST payment dates:

-          monthly                      for a monthly GST payer,

-          two monthly             for all others*

(*includes two and six monthly GST registered and non GST registered businesses.)


  • General

AIM may be suited to businesses with:

-          variable income between years,

-          large income fluctuations over a year,

-          expecting a much worse year (avoid safe harbour payments based on last year with no risk),

-          simpler structures.


If all AIM payments are made on time then there is no interest due on tax payable including any square up at the end of the year which is payable by the usual terminal tax date.

 If we are already processing your GST returns we will advise you if we believe AIM is appropriate for your business.

Please contact us if you have any questions and in particular if you prepare and file your own GST returns but are still keen to use AIM.