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AIM - new provisional tax option for small businesses

March 6, 2018

CG comment – IRD are running an extensive campaign promoting AIM and what it perceives to be its benefits over existing methods for calculating and paying provisional tax. This campaign includes contacting taxpayers directly to arrange visits to discuss how AIM works.

The idea behind AIM is that taxpayers pay provisional tax based on their actual income as calculated by their accounting software rather than an amount based on a previous year’s tax payments. The objective is to better match provisional tax payments to current year income.

In theory having your accounting software calculate your provisional tax seems simple, however, IRD requires taxpayers to make a number of adjustments to accounting income to achieve a figure that is acceptable for determining provisional tax obligations. The need to make these adjustments can result in added complexity.

Before deciding to adopt AIM we strongly recommend that you first speak to us

From April 2018 small businesses that have turnover of less than $5 million a year can work out their provisional tax using the accounting income method (AIM).

How AIM works

AIM uses new functionality included in approved accounting software to work out payments. You can continue to use another provisional tax option if you think your business won't suit AIM. It will suit your business if:

  • your business is growing
  • you're new to business
  • you have irregular or seasonal income
  • it's hard to forecast your income accurately
  • you have accounting software or want to start using accounting software.

Once you've opted in to AIM you'll only pay provisional tax when your business makes a profit. This will help you to avoid cash flow problems.

As long as you make your payments in full and on time, there is no exposure to use-of-money interest. If your business makes a loss you can get your refund straightaway rather than waiting until the end of the year.

Start-up and ongoing costs to businesses

We've worked to make sure AIM doesn't increase ongoing compliance costs and is simple for you to use during the year. AIM will help you spend more time on your business instead of worrying about tax bills.

Check you're eligible to use AIM as a provisional tax method

If you ...

then ...

  • have turnover under $5m
  • opt in before your first provisional tax date for the year

you can use AIM

If you ...then ...
  • have investments in foreign investment funds (FIF) or controlled foreign companies (CFC) for the income year
  • are in a transitional year (a year in which you've changed your balance date)
  • are any of the following:
    • partnership
    • trustees and beneficiaries of a trust
    • Māori authority
    • superannuation fund
    • portfolio investment entity (PIE).

you can't use AIM

Finding a provider of AIM-capable software

These software companies will have AIM functionality in their accounting packages for the financial year starting 1 April 2018.


  • MYOB AccountRight Live
  • MYOB Essentials Accounting


  • APS software


  • Xero Tax Practice Manager

Choosing AIM for your provisional tax

To choose AIM, complete the set up in your software. The set up will include a step where we'll help you confirm if you're eligible to use AIM. You shouldn't need to contact us.

You don't need to enrol or register to use AIM. On your first due date send us your statement of activity through your software and we’ll know you’ve chosen to use AIM for the 2019 income year. You'll also need to send your payment if there is one to make

Your statement of activity

On each AIM due date, your software will work out if you have a payment to make. It will collate the information to show us how it came to this amount - this is your statement of activity.

You'll be able to see it before it's sent to us. It's similar to the Summary of financial statements (IR10) form with AIM information added, eg refund instructions.

It isn't an income tax return and isn't processed as one. This means if you make a mistake you can simply fix it in the next statement.

What happens if a statement of activity isn't filed

If a statement of activity is filed but payment isn't made, penalties and interest will apply to the underpayment. These will continue to apply until you make payment.

You can't miss filing more than two statements of activity. If you do, you will no longer be able to use AIM and we'll treat you as using the estimation option. The estimation option will apply as if you have been in it for the whole year. This will result in exposure to use-of-money interest. It won't be automatic - we'll talk with you first to make sure there hasn't been a misunderstanding or system error.

How AIM-capable software will work out your AIM payments

AIM-capable accounting software has the functionality to work out if it needs to include adjustments, for example:

Your depreciation register

Is it up to date and does it use our depreciation rates?

Private use expenditure

Has it been removed from accounting income?

Debtors and creditors

Optional, unless you include them for your GST calculation.

Trading stock

Included where you have a perpetual inventory system or:

  • it can be manually included, or
  • you can use last year's figure.

Prior year losses

If we've already assessed these, you can include them to reduce your payments.


Shareholder salaries.

The profit remaining is used by your software to work out your provisional tax payment based on your:

  • company rate, or
  • individual rate.

If there's no profit you won't need to make a provisional tax payment.

Making provisional tax payments using AIM

Your AIM software will work out your provisional tax payments and let you know how much to pay. Your due dates for AIM are generally the same as your GST due dates:

  • monthly (if you're registered for monthly filing), or
  • two-monthly (if you're registered for two or six-monthly filing).

If you're not registered for GST, your dates would be the two-monthly GST due dates that align to your balance date.

Provisional tax payment refunds

If you have a drop in profit that means you have overpaid you can get a refund through your statement of activity. You don't need to contact us or file any other documents. These refunds will help with cash flow if your profit drops due to seasonality impacts or an adverse event.

You can ask us in your statement of activity to:

  • release a partial or full refund
  • hold your refund, or
  • transfer to another tax type or customer.

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