Provisional tax – is there a better way?
on June 4, 2019 / by Tom Beswick
If all your profits come in summer, rather than winter, then that August provisional tax payment is often painful.
The AIM system is designed to take your current results with each GST return and calculate the tax due at the time. If you don’t make money for 6 months of the year – then there’s no provisional tax to pay. If you have a large increase in sales / profits on last year then this system will help you as you’ll pay the tax at the time, and there’s less chance of a nasty surprise tax bill at year end.
The AIM system does require your accountant to be involved to file the AIM return after you’ve done your GST – however for the clients we got started on it last year it was quite a minor cost in the scheme of things. My clients appreciated having their tax smoothed out throughout the year so it was due when they had the money, rather then it being due when they didn’t have it.
Generally, I find my clients are mostly accepting of the tax they have to pay – but many struggle with the hit to cashflow of the 1/3 system. AIM makes that side of tax easier to deal with.
If you are a 2 monthly GST’er you’ve got one window this month to ‘opt in’ by getting an AIM return filed by the end of the month. If you miss it then you must wait till next year.
There are a few other things to understand about the AIM system so give me a call if you want to chat through to see if it can benefit you.