Do you always have the cash when it comes to paying provisional tax? When you pay 3x a year do you find it always matches when you earn your profits? Would you rather pay provisional tax based on when you earn profits instead of many months later? Do you find it tough to manage the catch-up in tax when your profit changes year on year? If so, there might be a better way for you to manage provisional taxes. The Accounting Income Method (AIM) is a simpler way to manage provisional tax. It uses Xero to calculate your tax based on your actual financial results during the year—helping align tax payments with your cashflow rather than estimates or tax amounts based on last year +5%.
AIM is available to businesses with a turnover of less than $5 million per year.
Who Should Consider AIM?
AIM may be suitable if:
- Your business is growing
- You’re new to business
- Your income is irregular or seasonal
- It’s difficult to accurately forecast your income
- You want your tax payments to be less lumpy and more connected to when you earn the profit
- You want peace of mind knowing that your tax is up to date
Pay Tax Based on What You Earn
A key benefit of AIM is that your provisional tax is based on your actual income. This means you only pay tax when you earn income, helping smooth cashflow throughout the year.
Your payment frequency generally aligns with your GST cycle (often 6x a year):
How AIM Works for you
When your GST return is filed for the month you let your accountant know ( unless they already prepare the GST return ). Then they quickly review your Xero results for the 2 months, download that and prepare a very brief mini AIM tax return.
Even if no payment is due, a statement is still sent so Inland Revenue has up-to-date information. If something needs correcting, or gets amended later in your Xero file, it can be adjusted in your next submission.
Access to Refunds During the Year
AIM also allows you to access refunds during the year if your income drops or your business makes a loss.
This is more flexible than traditional provisional tax methods, where refunds are usually only processed after year-end.
End-of-Year Adjustment
At the end of the financial year, you will still complete a final tax “square up.” AIM reduces the likelihood of a large terminal tax bill because payments are made based on actual income throughout the year.
If a small balance is owed, no interest is charged—you simply pay the difference. Penalties only apply if payments are missed or made late.
In Summary
AIM offers a practical and flexible way to manage provisional tax, particularly for businesses with changing or unpredictable income. It removes much of the guesswork and helps ensure tax payments better reflect your actual financial position. The clients who use it find it much easier to stay on top of their tax.
If you get frustrated with the traditional 3x a year provisional tax then maybe AIM could be helpful for you. Give us a call, the team at Ingham Mora can help you explore your options and get set up correctly.