Budget 2016: SME-friendly tax packageRevenue Finance Budget 2016
An SME-friendly tax package announced by the Prime Minister today will reduce compliance costs and make tax simpler for small businesses, Finance Minister Bill English and Revenue Minister Michael Woodhouse say.
“The package will make paying tax easier and more certain, reduce the burden of interest and penalties, and help small businesses tailor payments to their circumstances,” Mr English says.
“We want the tax system to fit in with how businesses operate, not the other way around.”
Key measures in the proposal are that:
- Provisional tax is being reformed, with a new pay-as-you-go option giving up to 110,000 small businesses a way to pay tax as they earn income from 1 April 2018.
- Use-of-money interest will be eliminated or reduced for the vast majority of taxpayers.
- Contractors will be able to choose a withholding tax rate that suits their needs, rather than one being set for them.
- The ongoing 1 per cent monthly penalty will be scrapped from 1 April 2017 for new debt – although immediate penalties and interest charges for late payments will continue to apply.
Mr Woodhouse says the changes are part of a wider business transformation programme which will support the use of new technology to make it easier to deal with Inland Revenue.
“Around 30 to 40 per cent of businesses currently use cloud-based accounting software. This is expected to grow to 85 to 90 per cent in the next 10 years.
“This package allows small businesses to pay provisional tax through their accounting software, rather than having a separate process for their taxes.
“Small businesses are the backbone of the New Zealand economy. We want to help them spend more time focused on their business, not their taxes.”
The package is expected to cost $187 million over four years.
To find out more, and to provide comment on the proposals, visit www.makingtaxsimpler.ird.govt.nz. Submissions close on 30 May.