The Government is particularly focussed on supporting small businesses to succeed, because they are a key driver in our economy and they also involve motivated kiwis creating local opportunities and innovation. Small businesses, which make up the vast majority of New Zealand businesses, created 12,400 full-time equivalent jobs over the last year – equating to a third of the total employment growth. This year's budget has a range of improvements to the business environment that affects small to medium size businesses.
The top three concerns of small business highlighted in the National Bank survey: lack of skilled employees, regulation and the tax burden, have been recognised in this year's Budget response.

Tax changes include:

Depreciation

Alignment of depreciation rates more closely with the useful life of assets. A double declining balance method has been announced, so for example an asset with a ten year economic life will be written off at a rate of 20% of its diminishing value. For equipment such as laptops the change will result in a 25% increase in the allowable depreciation rate to 60% per year.

The threshold for low value assets has been increased from $200 to $500.

Fringe benefit Tax changes

Many SMEs no longer need to file returns or pay FBT due to the increased threshold of $5,000 per business tool.
For example, when a business provides laptops to employees it will no longer have to worry about FBT liabilities should the computer occasionally be put to personal use.

The minimum value thresholds applying to unclassified fringe benefits has also been raised, to reduce compliance costs. The employee minimum value threshold will go up from $75 to $200 per quarter, and the employer threshold will rise from $450 a quarter to $15,000 a year.

This will reduce compliance costs for businesses by reducing the need to measure and account for FBT for minor benefits.

Payroll agents will be paid an allowance to manage the payroll for the first five employees of all businesses. This will mean a reduction in the compliance overhead for many small businesses.

Alignment of GST and Provisional tax payment dates will reduce the number of tax payment dates.

Businesses will also be allowed to calculate their provisional tax payments based on their GST returns, which will bring into alignment their cashflow, and tax payment requirements. It will also make compliance and calculations easier.

Equity investment in SMEs will be encouraged by changes to rules governing access to tax deductions for R&D expenditure where companies bring in new equity investors after their initial development stage.

These changes have been carefully implemented to stimulate economic growth, making it easier for businesses to become more productive and efficient.

There are other non tax Budget 2005 Business Announcements:

$9.9 million to develop an improved government portal, biz.org.nz, allowing easier access to all government services.

$4.45 million over the next three years for carbon tax mitigation. Including pilot grants, training and education package to help energy intensive small and medium size enterprises take up energy saving technologies to offset the impact of the carbon tax.

In addition to this there is a need to improve the management and business capability of our SMEs.

$5.6 million to Project Collaboration, a public/private initiative, to ensure management and business capability development services meet the needs of New Zealand businesses.

An additional $6.62 million is to be spent on mentoring for Small Business and advisory boards for businesses as recommended by the Small Business Advisory Group.

Many of the proposals will be included in the tax bill due to be introduced at the end of May.

The changes are part of the government’s campaign to simplify tax and reduce business compliance costs.

The government announced 104 reductions in compliance burdens in 2004. The new Small Business Advisory group will ensure that government’s concern for this issue never flags.

Other Budget announcements that support economic growth are the investment in industry training to address the skills shortage, extension to child care subsidies to give more choice to people who want to work and the money going into getting more people off a benefit and into work.

This year's budget changes build on the Working for Families package, which is focused on supporting working families.

Although commentators expect the economy to slow from the average rate of growth of around 4% to 2.5 %, by NZ standards this is still good and means we remain at the top end of the OECD. There is plenty of reason to remain optimistic and I personally am confident that this year's budget has been a good response to small business concerns and needs. There is always room to improve and I am developing various projects in this portfolio that will help SMEs further.

This government respects the initiative and courage it takes to start up a new business and values the huge contribution small businesses make to the economy and to employment.