Tax changes to ease small-medium business burden

The costs of doing business in New Zealand will be reduced through a series of tax changes proposed by the government, Revenue Minister Michael Cullen said today.

A taxation bill to be introduced next month will contain a number of measures of special relevance to small and medium-sized businesses, he told the International Fiscal Association conference in Christchurch.

"The changes are part of the government's drive to simplify tax and reduce business compliance costs," Dr Cullen said. "They will be complemented by a further – larger - tax package to assist business and economic growth in the May budget.

"The three payment dates for provisional tax will be aligned with the GST due dates, to reduce the number of payment dates. Small businesses that want to pay provisional tax more frequently, to help with their budgeting may choose to make six payments a year, rather than three larger payments.

"A complementary change will give GST-registered businesses the option of basing their provisional tax payments on a percentage of their GST turnover. This will suit businesses with seasonal income, since their tax payments will be more closely aligned with income flow.

"Also to be introduced is a new subsidy for small businesses employing payroll agencies. When a business takes on its first employees it takes on a whole new set of payroll obligations, which include not only PAYE work but also deducting child support and student loan payments from staff wages.

"The amount of the subsidy, which will come into effect on 1 April next year and be paid on up to five employees, will be decided by negotiation with payroll agents and introduced on a trial basis with a review after two years," Dr Cullen said.

The provisional tax reforms will have a phased implementation:

* The due date for payments of GST will change from the last working day of the month to the 28th of the month, with effect from taxable periods ending on or after 31 March 2006.

* Provisional taxpayers will begin paying provisional tax along with their GST payments and will be able to base their provisional tax on a percentage of their GST sales with effect from the beginning of the 2007-08 income year.