Understanding the key benefits of AIM for small businesses

The Accounting Income Method (AIM) is a new method of calculating and filing provisional tax that’s available to small businesses as of 1 April 2017.

AIM uses the last two months’ profit and loss instead of last year’s income data to yield more accurate business reporting and reduce your tax burden.

This AIM method is particularly useful for new businesses and those with fluctuating cash flow or a seasonal aspect to their revenue.

The key benefits of AIM

• Better accuracy – By using more recent financial data, AIM provides enhanced reporting accuracy.
• Better budgeting – Improve your cash flow with Pay-As-You-Go provisional tax, so you won’t have to reserve funds for hefty tax bills.
• No more interest – A business using AIM to calculate and pay provisional tax will not be charged use-of-money interest unless the business has failed to pay the instalments as calculated under AIM.
• Up-to-date ledgers – AIM provides regular motivation to keep your chart of accounts up to date, giving you a better snapshot of your business performance.

What’s required to access the benefits of AIM?

To be eligible for AIM, your business must turn over less than $5 million per annum – it can’t be part of a partnership or trust and you can’t be in a transitional year.

Importantly, you’ll need to have accounting software with AIM functionality, such as MYOB Essentials and AccountRight.

After that, all you need to get started with AIM is to submit your first statement of activity and make your first provisional payment for the new financial year.

READ: What is AIM?

When can I get started?

Businesses that file GST every month or every two months will find their AIM is due on the same date, whereas those that file GST every six months will default to doing AIM every two months.

This means your first AIM submission will be due on 28 May for those filing monthly, or 28 June for those filing bi-monthly.