You may have heard the IRD is introducing a new provisional tax method – AIM – which stands for Accounting Income Method.
AIM is Pay-As-You-Go income tax filing introduced by IRD. It calculates provisional tax payments based on actual earnings for the current financial year rather than working on an estimate of last year’s earnings.
Only companies with gross income under $5 million can apply, and payments are due in line with your GST filing dates.
How AIM would work for your farming business
A statement of activity is filed every GST period and needs to include adjustments such as:
- Prior year losses
- Trading stock/livestock on hand
- Private expenditure
- Shareholder salaries
For example, you’ll need to supply a livestock valuation for each GST/AIM period. This requires an accurate livestock tally, including any offspring born. Essentially, you would be paying tax when the offspring are born as opposed to when they are actually sold, later in the year.
Is Cashmanager software AIM compatible?
IRD may encourage you to change to AIM compatible software.
The Cashmanager systems have been designed specifically for farmers, with an emphasis on planning, and have traditionally left managing income tax assessments to accounting professionals.
Over time, our plan is for Cash Manager Focus to be AIM compatible, in a way that benefits farmers.
For now, we are focused on the migration tool and feature releases for Focus. If you’re thinking about applying to AIM in the short term, we strongly suggest you talk with your accountant.