Changes to provisional tax

Small businesses, sole traders and contractors can choose a new pay-as-you-earn option rather than paying provisional tax instalments several times a year as changes to pay-as-you-earn tax have come into place this April.

The changes were made to help small businesses pay provisional tax based on their cash flow rather than the previous year’s earnings or estimated earnings for the current year. Paying provisional tax as you earn profit provides more certainty about cash flow.

This new method is known as the Accounting Income Method (AIM). It is optional and only available for businesses with an annual turnover of less than $5 million. Other options for provisional tax still remain in place.

For those who do select AIM, you will need to set it up in your accounting software before your first provisional tax payment of the 2018/19 financial year.

The first AIM payment dates are 28 May for monthly GST filers, and 28 June for two- and six-monthly GST filers, and those not registered for GST. If switching from provisional tax instalments to AIM, your final instalment payment is in early May so be prepared for the overlap in tax payments.

Posted on 16 April '18 by , under tax.