On Monday the IRD released a series of 10 determinations setting out the adjustments required for paying provisional tax under the Accounting Information Method.

The adjustments cover the following areas:

  • Private Expenditure (excluding entertainment)
  • Trading stock
  • Payables and receivables
  • Losses
  • Depreciation
  • Livestock

The original intention was for this method to be largely automatic from the taxpayer software however many of these adjustments can or will need to be made manually. There is also a split between compulsory adjustments such as for private use and optional adjustments such as for depreciation.

Other adjustments, such as stock, are only available where a stock take is performed at each period (possible six times a year) or a perpetual inventory system is used. One particular point to note is that taxpayers registered for GST on an invoice basis will be required to report income on an accrual basis where for others this will be by election. This could have cash-flow implications for these tax payers.

This method is available for the 2018 / 2019 income year but a taxpayer must use it from the start of the income year for the method to apply. For taxpayers with a March Balance date this gives a little over four months including Christmas to understand the adjustments required and if the method will work for them.

If you would like to know if the accounting information method is right for you, you should contact your advisor here at Polson Higgs.