New business tax package

At a Pre-Budget 2016 speech to a Business New Zealand event on April 13, Prime Minister John Key announced the release of a business tax package which includes proposals to simplify business tax.

In a media release, Finance Minister Bill English and Revenue Minister Michael Woodhouse stated that the SME-friendly tax package announced by the Prime Minister will reduce compliance costs and make tax simpler for small businesses. Mr Woodhouse said that the changes are part of a wider business transformation programme which will support the use of new technology and make it easier to deal with Inland Revenue.

The package will allow small businesses to pay provisional tax through their accounting software, rather than having a separate process for their taxes.

A paper, "Making tax simpler - Better business tax", has been released on the 16 measures proposed by the Government. One of the proposals, the Accounting Income Method (AIM), is the subject of a more detailed discussion through an online forum. The 16 measures are as follows:

  • increasing the current $50,000 residual income tax limit for use of money interest (UOMI) to $60,000 for individuals and non-individuals.
  • removing UOMI interest for the first two provisional tax payments for all taxpayers who use the uplift method
  • allowing businesses to use the Accounting Income Method (AIM) to pay provisional tax through their accounting software (applies from April 1 2018)
  • allowing companies to pay tax on behalf of shareholders (applies from April 1 2018)
  • allowing contractors to elect their own withholding rate
  • permitting voluntary withholding agreements
  • extending withholding tax to labour-hire firms
  • no longer imposing incremental late payment penalties on future GST, provisional tax, income tax and Working for Families Tax Credits (WfFTC) debt
  • sharing tax information for significant debts with credit reporting agencies
  • sharing information with the Companies Office about serious offences
  • simplifying FBT for close companies
  • simplifying deduction calculations for dual use vehicles and premises
  • increasing thresholds for adjustments in subsequent returns
  • removing the requirement to renew RWT exemption certificates annually
  • increasing the threshold for annual FBT returns from $500K to $1m of PAYE/ESCT, and
  • modifying the 63-day rule on employee remuneration

The Government is seeking feedback on the proposals now. To find out more, and to provide comment, visit Submissions on the issues paper and online forum close on May 30.