The government recently announced the possibility of a much simpler way for small businesses to stay on top of their taxes. They are proposing a new type of provisional tax called “Accounting Income Method (AIM)”.
Instead of having to budget for and pay in 3 installments through out the year, small businesses could opt for the new payment method and pay as they earn, taking out the uncertainty of how much tax needs to be paid at a later date and allowing for fluctuating income through out the year.
If you want to learn more on how this change might help your business, you can read about it here: IRD information for small business
Personally I think this is a fantastic initiative, particularly for those that are new to business, it can be really hard and financially crippling for new businesses having to pay a set amount based on the previous years figures, especially if you started part way through a financial year. Not having a full years trading behind you to base your information on can make it tricky, do you over estimate provisional tax and then struggle during periods when income was not quite as good as you had predicted, or underestimate and then get left with interest/use of money charge from the IRD?
I really hope that this initiative gets given the green light, I will certainly recommend it for the majority of small businesses I deal with.
