KEY POINTS:
Prime Minister John Key has unveiled small business tax changes worth $480 million over the next four years, as part of a wider scheme he hopes will promote economic growth and protect jobs.
In a speech in Auckland this morning, Key outlined 11 tax changes and other measures designed to help small and medium sized business.
Key said the measures were part one of the Government's 'Jobs and Growth Plan', with more announcements still to be made.
"I want to lighten the load on small and medium-sized businesses. Improving the environment for business, and therefore jobs and growth is a long-term undertaking for the government," said Key.
The tax announcements were aimed at reducing the impact of tax on firms' cashflows.
Government's tax initiatives will provide some welcome relief for the small and medium sized businesses that are so important to our economy, said Geordie Hooft, tax partner at accountancy firm Grant Thornton.
"Most of the initiatives involve the movement of thresholds that will provide relief in terms of cashflow and administrative costs," said Hooft. Many of the changes are increases in the amounts that were already signalled when the tax bill, still before Parliament, was introduced last year".
The provisional tax reduction is one area where cashflow will be eased. "That makes sense from the perspective that the economic slowdown will see many businesses experience lower profits in the current year but it will still be important for businesses to monitor their performance to ensure that the right amount is being paid," said Hooft.
Alasdair Thompson of the Employers and Manufacturers Association praised the tax initiatives.
"Today's five part package will help shore up business confidence", he said.
"The change to the formula for estimating profit on which provisional tax is calculated, and the cut in the interest rate charged on underpaid provisional taxes are especially timely.
"Measures like these greatly help small businesses by releasing more cash at a time when it may be slow coming through from some customers," he said.
Thompson said the reduced compliance costs on PAYE, FBT and GST returns, and the expansion of the export credit scheme, will also be greeted warmly.
At the same time, he also put out a call for the company tax rate to be reduced, a measure he hoped the Government would introduce at the first possible opportunity.
"New Zealand's company tax rate is still amongst the highest in the Asia Pacific region", said Thompson.
The two largest business tax measures announced today are the removal of the requirement for businesses to factor in a 5 percent growth in income when they pay provisional tax a cutting of the underpaid tax penalty from 14.24 percent to 9.73 percent.
Finance Minister Bill English said the changes would be in legislation to be introduced next week and be in place by April 1.
Other tax initiatives in the package included more generous business-related tax deductions.
Other elements in the package included:
* an expansion to the export credit scheme;
* extending what cases the Disputes Tribunal can consider;
* expanded business advice services;
* and a prompt payment requirement for government agencies.
There are a range of threshold changes including GST, and changing the once a month filing and payment threshold for PAYE deductions from $100,000 to $500,000 with the same increase in the fringe benefit tax filing threshold.
Advice will be easier to access. The Biz 0800 line will be beefed up and businesses can access free business health checks and a mentoring service.
The aim of widening the scope of the Disputes Tribunal was to reduce the amount of time small businesses spent in District Court battles.
The claim levels of $7500 and $12,000 would be increased to $15,000 and $20,000.
Changes to the export credit scheme will give greater access to short-term trade credit insurance, which is used as a guarantee to banks that an exporter will be paid.
The State Services Commission has agreed to the government's request to pay bills promptly or early to help small and medium businesses with cash flow.
- NZPA
See details of the tax changes here
