26th May, 2016
MYOB attended the Government’s eighth budget lock-up to understand its impact on small to medium businesses in New Zealand.
Overall we’ve given it a tick – but there is more work to be done to reduce the tax burden on SMEs.
It’s positive that the Government continues to recognise the important role that SMEs play in driving the New Zealand economy, especially in light of the impact of the dairy downturn.
The Budget includes a $187 million SME-friendly tax package that will change how small businesses pay provisional tax. When the new pay-as-you-go system comes into effect, it will a mean business with less than $5 million annual revenue will be able to pay provisional tax directly through their cloud accounting platform, which will calculate the amount owing based on real time analysis of the businesses cashflow and expenses.
Paying provisional tax is a massive pain point for small business owners so the tax changes will be welcomed by the more than 110,000 businesses that could be eligible.
MYOB has conducted regular research into what policies small business owners would most like to see addressed to help them succeed. Simplification of provisional tax rules always comes out as top of the wish list for businesses, so it’s great that the Government has responded to that feedback.
The package also eliminates or reduces use-of-money interest for most taxpayers, allowing contractors to more easily choose a withholding tax that suits their business and stops the ongoing 1 percent monthly penalty for late payments.
The latest MYOB Business Monitor research of more than 1,000 local SMEs, conducted for MYOB by Colmar Brunton, saw 83 percent of businesses identify “simplification of provisional tax rules and processes to make it easier for businesses to accurately determine and meet their tax obligations” as the government policy most important to their operation.
There is also an additional $857 million investment in Inland Revenue’s new tax administration system. It will give businesses more ability to manage their tax affairs online, saving them time and money.
MYOB is engaged with Inland Revenue on ways to make business administration simpler and easier. Advances in our ability to provide up-to-date information about cash flow and costs in a business means that we can continue to build tools in our cloud-based platforms to make paying tax a whole lot easier.
The disappointing thing about this budget is that it does not contain measures to reduce tax rates on small businesses, something MYOB has long advocated for.
From July, the small business tax rate in Australia will be lowered to 27.5 per cent for small businesses with less than $10 million annual revenue. New Zealand’s company tax rate is 28 percent for all businesses.
In addition, Australian businesses with turnover less than $10 million have access to an instant write-off for purchases of equipment valued at $20,000 each. This has proven to be a massive shot in the arm to local firms who invest in new plant and equipment.
We think the Government is to be congratulated for managing the books into a healthy position. With increasing surpluses on the horizon, we’d like to see a focus on reducing tax costs on small businesses so they are in the best position to succeed.
Other initiatives of interest to small business include:
More information can be found at: www.budget.govt.nz