Provisional Tax – how does it work?
If you had to pay tax of more than $5,000 in your last income tax return, you may have to pay provisional tax for the following year. Provisional tax is like paying progress payments on next year’s income tax.
The amount you have to pay relates to your expected profit for the year. In practical terms, the amount of provisional tax you’re expected to pay is based on the tax you were liable for in the previous year, often referred to as residual income tax (RIT).
Even if you are not required to pay provisional tax, you may still elect to do so, to spread your tax obligations over the year. This can help you manage cash flow and take away the pressure of paying a lump sum at the end of the year.
For a new business, the first-year provisional tax payment can be tough. You must pay last year’s income tax at the same time as the first instalment of next year’s provisional tax. There are a couple of ways we can help you reduce the pain.
If you are self-employed or a partner in a partnership you may be entitled to a discount of 6.7% on your first year’s income tax. This is to encourage you to pay tax early and relieve the financial strain before you must pay provisional tax for the first time.
COVID-19 and provisional tax
In order to shrink compliance costs for smaller taxpayers and allow them to retain cash for longer, the government has introduced some tax relief measures that affect the normal rules for provisional tax:
- The threshold for provisional tax increased from $2,500 to $5,000 from the 2020/21 tax year. This means any current provisional taxpayers with provisional tax payments of less than $5,000 will have until 7 February following the year they file to pay their tax bill.
- Depreciation for commercial and industrial buildings is reintroduced from the 2021/22 income year. If you are a building owner, you will be able to adjust provisional tax payments immediately in anticipation of additional deductions that become available.
- If your business is affected by COVID-19 and:
- you need to re-estimate your provisional tax as your income falls short of the estimate and provisional tax has been overpaid, it may be possible to arrange early refunds.
- if you are unable to pay tax by the due date, Inland Revenue has discretion to write-off penalties and interest. You may be eligible for a UOMI (use of money interest) write off.
It’s important to keep your tax plan current. If circumstances change for your business, we need to adjust your plan. Let us know as soon as you can about the situation for your business.
Please ensure you check with your Accountant regarding the information above – they are best to advise you on this.
Transforming Businesses and Optimising Accounting Processes with Cloud-based Solutions
Preparing business plans and reconciling accounts regularly are imperative in any business’ accounting process. However, as a business owner, the accounting to-do list is hard to manage without the help of experts.
Entrepreneurs need to keep up with the changing times, and be open to using new tools that help with operating one’s tax and accounting operations. With the emergence of cloud accounting, businesses need to adapt, as time is becoming more and more of a valuable resource, and consumer behaviour and client expectations shift every day. Businesses need adequate tools and proper training to use these tools in order to keep up and remain competitive within their industry.
GoFi8ure values these emerging technologies, maximising their worth to help level up clients accounting systems and processes. The accounting services company offers Xero training, accounting, and cloud integration that can transform businesses and the way they tackle their accounting tasks. As cloud integration specialists, GoFi8ure eases companies’ load when it comes to administrative and time-consuming tasks.
GoFi8ure wants business owners to leave their requirements to the experts, to arrange all of their accounting requirements, tax obligations, and more – providing them with first-rate accounting solutions. GoFi8ure’s in-house tax experts and tax accountants help business owner employ effective strategies that will benefit businesses. One of GoFi8ure’s area of expertise is helping business owners file their business and personal tax returns accurately and on time. GoFi8ure is a proud member of the Accountants and Tax Agents Institute of New Zealand and a recognised Tax Agent with Inland Revenue.
GoFi8ure prides themselves with having the ability to cater to small and medium-sized businesses giving them the support that they need. From GST reconciliation to payroll, tax returns, and tax compliance, GoGi8ure can develop a suitable financial solution to fit a client’s needs.
To learn more visit The GoFi8ure website at https://gofi8ure.co.nz/
Maximise Xero’s Capabilities through Customised Training
Wellington’s trusted accounting firm, GoFi8ure, wants businesses to maximise the use of Xero to further their business operations. The mobile accounting company is offering Xero training to save businesses from time-consuming work, in order for them to focus on other important business tasks.
GoFi8ure aims to help business owners save more time and resources by helping them optimise Xero’s capabilities. As an official partner of Xero, GoFi8ure can expertly train businesses to efficiently use the software to their advantage.
Using Xero without fully understanding it could potentially lead businesses into spending just as much on administration as they would without it. It’s important to know how to wield your tools. Rather than hiring more staff to achieve greater efficiency, you can save money and time in the long run by training existing staff.
GoFi8ure provides one-on-one or one-to-many Xero training for individuals who are interested in making the most out of the accounting platform. The team can travel to varying locations, right to their customers’ doorstep. Whether it may be in Wellington, Hutt Valley, Wairarapa, Auckland or Dunedin, GoFi8ure can come to them to carry out the training.
What makes GoFi8ure’s Xero training special is that they have developed a tailor-made training programme using real-life data, for boosted efficiency. They also utilise a 12-step “best bookkeeping” checklist that will guide clients on the right track.
Furthermore, GoFi8ure also provides customisable Xero training, which can attend to the specific needs of each business. Business owners can discuss which company-specific topics they would like to cover, and GoFi8ure will tailor the training session to suit the business’ needs.
To learn more, visit the GoFi8ure website at https://gofi8ure.co.nz/
Are you on Xero yet? If not, you should be! By moving your accounts onto a cloud-based accounting system, you will spend less time worrying about invoicing and expenses and be able to focus on what you do best: running your business. Here are 4 reasons why you should choose Xero:
1. Cloud-based accounting
Xero can be accessed from anywhere, anytime, and it is all live. Whether you want to use your smartphone, tablet or your computer, Xero lets you keep on top of your business finances wherever you are.
2. Improve cash flow and get paid faster
Every business needs to get paid, and Xero helps businesses with tools that help you get paid faster. Go beyond “traditional” printed invoices and start using online invoices. Xero helps to create, send and automate customised, professional looking invoices. You can also set automated reminders to ensure your invoices don’t get forgotten and you get paid faster!
3. Xero grows with you
If you need multiple systems to compliment your business, Xero’s ecosystem can help you. Xero works with more than 500 add-ons so you can craft a solution that meets your needs.
4. Automatic backup and security
With Xero, all data is backed up daily so you do not need to worry about manual backups for your data. If a computer crashes or a laptop gets lost or stolen, all your important accounting data remains unaffected because it’s stored “in the cloud.”
Transform the future of your business by using Xero Accounting Software and Online Bookkeeping. GoFi8ure can help you get set up before the financial year and provide training so you can be confident in your accounts! To find out more, email us on firstname.lastname@example.org today!
Lisa Martin from GoFi8ure discusses the important role a Bookkeeper can play in small businesses and how Xero has helped to bring the term back into the marketplace.
To view the video click here or on the image.