Possible Impact of Accounting Income Method (AIM) on Small and Medium Enterprises (SMEs) in New Zealand

Abstract

Accounting income method (AIM) has been introduced as a provisional income tax payment method in April 2018 in New Zealand. One of the concerns from the taxpayer side is that the provisional tax payment amount and timing is not necessarily consistent with that of actual income and profit of taxpayers. AIM utilises advanced technologies of accounting software, MYOB, Reckon APS or Xero, to address issues including this. The major purpose of this research was to evaluate possible impacts of AIM on New Zealand small and medium sized enterprises (SMEs) based on available information related to AIM. In addition to the publicly available information on the provisional income tax payment methods and AIM, an official information request to Inland Revenue (IR) and hearing/inquiry surveys to IR officer was conducted as well as internal communications in the authors’ affiliation accounting firms. Estimations of hypothetical cases showed there would be difference in income tax payment amounts, 0.16–0.3% of annual revenue, between the Standard method and AIM when the time value of money is considered. AIM would have significant impacts on New Zealand SMEs under such conditions that accounting software would be more proliferated, or conventional accounting software would incorporate data available from existing merchandise, EFTPOS, bank accounts and cashing systems.