AIM, the Accounting Income Method, lets you pay provisional tax based on what you are actually earning, calculated by your accounting software as you go. For businesses with bumpy income, it can replace guesswork with something closer to reality.
Quick answer
AIM (the Accounting Income Method) is one of the ways to pay provisional tax. Instead of basing instalments on last year's tax, your accounting software works out a payment from your actual year-to-date profit each GST period and you pay that. It suits businesses whose income rises and falls during the year, because you pay more in good months and less in quiet ones. The catch is that it requires approved software and disciplined, up-to-date books.
How AIM works
The standard method estimates this year's provisional tax from last year's result, which can be wrong in either direction if your income changes. AIM takes a different approach:
- Your accounting software calculates a statement of activity from your real figures, usually each GST period.
- That statement produces a provisional tax amount based on profit so far this year.
- You pay that amount, so payments track your actual trading.
- If you make a loss in a period, the AIM payment can be nil, and overpayments can be refunded during the year rather than waiting until year-end.
The big advantages are accuracy and cashflow: you are far less likely to face a large surprise top-up or to overpay early. The trade-off is that your bookkeeping must be current and accurate, because the software is doing real-time tax maths on whatever you have entered.
A simple example
A seasonal business earns most of its profit in summer. Compare a year under the two approaches:
| Period | Standard method | AIM |
|---|---|---|
| Quiet winter period | Fixed instalment due regardless | Low or nil payment |
| Busy summer period | Same fixed instalment | Higher payment reflecting real profit |
Under the standard method the business pays the same instalment in a loss-making winter as in a booming summer. Under AIM the payments follow the actual profit, which keeps cash in the business during the quiet months.
Common mistakes to avoid
- Falling behind in your bookkeeping. AIM only works if the software has accurate, current data to calculate from.
- Choosing AIM with steady income. If your profit is flat year to year, the standard method may be simpler with no real downside.
- Switching mid-year on a whim. There are rules about when you can move onto and off AIM.
- Ignoring the software requirement. AIM needs approved accounting software, not a spreadsheet.
Where this fits in your return
AIM is one option within the broader provisional tax rules, explained on our provisional tax page, and it interacts with the safe harbour rules that shield you from use-of-money interest. Because AIM runs through your accounting software each GST period, it ties into the wider GST and provisional tax service.
How Fernway can help
We assess whether AIM actually suits your income pattern, set up your software so the statement of activity is reliable, keep your books current enough for AIM to work, and review each period so the payments are right. If the standard method is genuinely simpler for you, we will say so. Fixed fee, agreed before we start.
Book a free 20-minute review and we will work out whether AIM is worth it for you.
This is general information only, not personalised tax advice. Confirm your situation with us or check ird.govt.nz.
In plain English: AIM pays provisional tax from your real profit as you earn it, which is great for bumpy income, as long as your bookkeeping stays accurate and current.
This is general information, not personalised tax advice.See our full disclaimer.