Changes that won’t short change your business
Times have changed. Long gone are the days where we wrote down records and finances in perfect red lined ledger books, mulling over handwritten numbers from months ago, and wondering where that calculator has gotten off too. Even now, if your computer crashes, your details are in the cloud.
So to catch up, the Government has introduced sweeping changes to the way we do tax. Tax time is about to get a whole lot easier (and potentially cheaper) for you and your business. Finally.
New eGST online services
These changes went live in February 2017, and were the first step in making it simpler for people to digitally manage their tax and interact with Inland Revenue.
We were very proud at MYOB to be the first to market in NZ with the ability file GST returns online directly from accounting software.
Streamlining personal and business income taxes
Inland Revenue are introducing a new option for paying provisional tax, called AIM (Accounting Income Method) where you can pay your tax as you go using accounting software. There’ll also be changes to PAYE. The introduction of Pay Day PAYE will mean that businesses won’t have to wait till the 20th of the following month to submit the employer monthly schedule. They will be able to file on the day they process the pay run.
Streamlining Social Policy
By making the changes in stage 1 and 2, Inland Revenue will then be able improve the delivery of the social policies that they administer.
Complete the future revenue system
This will include transitioning any remaining taxes and social policies to a new platform and decommissioning technology platforms that are no longer required.
STAGE 2 is now well on its way
And this is where it gets good for your business. The Government has been working towards streamlining personal and business income taxes and bringing the way we do tax into the digital modern world. The two key changes being introduced in this stage are AIM (Accounting Income Method) and Pay Day PAYE.
AIM for better ways to pay taxes
AIM (Accounting Income Method) is a new option for paying your provisional tax. From the start of the next financial year, you’ll be able to choose to use AIM through your MYOB to pay tax as you go, matching the way your business receives its income. This will be particularly beneficial for new businesses and those with fluctuating revenue or are impacted by seasonality. It will also offer you more certainty around provisional tax, reduce those pesky compliance costs and, avoid use of money interest charges.
Benefits of AIM
- Better accuracy when provisional tax is automatically calculated by accounting software.
- No more guess work when provisional tax is calculated against the income you actually earn.
- Better budgeting for your businesses cash flow with pay as you go provisional tax. You won’t have to hold onto funds for large tax bills.
- No more interest as the use of money interest won’t apply to businesses using the Aim method for provisional tax.
- AIM is a fourth option for calculating and submitting provisional tax, it doesn’t replace the existing methods, it’s optional.
- Perfect for new businesses, those that are affected by seasonality or have fluctuating income
The taxpayer can use AIM where they have:
- A turnover of $5 million or less.
- Not a partnership/trust/member of group.
- Has AIM capable accounting software that is up to date.
- Is not in a transitional year.
Frequency for AIM filing
- For those using AIM, provisional tax payments will be made
monthly for businesses registered for monthly GST returns.
- Payments will be made on a two-monthly basis for businesses
on a two-monthly or six-monthly GST filing option.
What are we up to?
We’ve been working closely with Inland Revenue, and have now released AIM in both AccountRight and Essentials. You can complete setup in advance of filing your first AIM statement of activity on 28 May for monthly returns, and 28 June for 2 monthly.
What does this mean for you?
It means there’s a fourth option for paying provisional tax which may be of real benefit to you and the way you do business. Instead of calculating provisional tax on previous years revenue, you can effectively pay it as you earn money. This is particularly beneficial for new businesses and those with fluctuating revenue, or those affected by seasonality, and will greatly reduce the chance of underpaying or overpaying.
You might want to get in touch with your accountant or advisor to check if you are eligible, and what you need to know to get started. There will be a little bit of set up required but once it’s done, it’s done. After that the form is mostly auto-filled in from your ledger for you and you can file it with Inland Revenue directly from your accounting software. It’s as easy as that.
Changes are proposed to PAYE, including filing directly from software and via myIR, to further integrate tax obligations into a business’s regular payroll processes. These changes, however, have not passed as legislation just yet.
Instead of doing your weekly, fortnightly or monthly pay run and then having to remember to submit your Employer Monthly Schedule on the 20th of the following month, you’ll submit your filing at the same time you do the pay run. Filing PAYE will become part of the pay run process and you’ll be able to do it directly from payroll software.
There will also be a reduction in the electronic filing threshold from $100,000 of PAYE per year to $50,000 of PAYE which means this will be applicable to even more businesses.
These changes are designed to reduce compliance costs and will create a foundation for future changes to social policy.
While we do expect that changes to Pay Day PAYE will be passed as legislation, this hasn’t happened just yet. This means that the dates Inland Revenue are working to may change. Inland Revenue were expecting to be ready to start accepting filing on pay day from April 1 2018 and that it would become mandatory on April 1 2019. We’ll make sure we keep you informed on how it plays out.