29 May 2016

Last chance for SMEs to support provisional tax changes

Businesses are being encouraged to support proposed changes to the provisional taxation system before the initial consultation period closes on Monday. Cloud accounting software provider MYOB says the changes will remove a top pain point for New Zealand SMEs and the more submissions in favour of the change, the better the outcome will be.

“Paying provisional tax tops the list in terms of pain points for small business. Having to guess what your business’s profit is going to be this year based on what you made last year is a nightmare,” says MYOB General Manager James Scollay.

“Get it wrong and you get whacked with the difference, plus use of money interest. Small businesses have been crying out for tax reform in this area, so they should definitely speak up in favour of the proposals.”

The changes will mean moving to a pay-as-you-go Accounting Income Method (AIM), which will shift tax from being an extra compliance process, to being part of the normal accountancy work a business already does to keep on top of its finances.

The way the new system will work is that for a business with less than $5 million revenue, every three months its cloud accounting software will calculate the tax obligations owed based on real time analysis of the business’s cashflow and expenses, and prompt the owner to submit a return.

That will then be lodged directly to Inland Revenue through the software and as long as the business pays what the system has calculated, if there is a difference at the end of the financial year the business will not have to pay use of money interest. The Government calculates that 110,000 businesses could benefit from the changes.

“MYOB has encouraged the development of this policy with Inland Revenue and we look forward to continuing to work with it to make the changes as business-friendly as possible. Cloud accounting software’s ability to provide up-to-date information about cashflow and costs in a business means that we can start to build in these tools to make paying tax a whole lot easier,” says Mr Scollay.

“MYOB conducts regular research into what SMEs say are the top policy priorities for them. Our Business Monitor survey shows that simplification of provisional tax rules is top of the wish list for businesses, so it’s great that the government has responded to that feedback.”

The latest MYOB Business Monitor research of more than 1,000 local SMEs, conducted for MYOB by Colmar Brunton, saw 83 per cent 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.

Last week’s budget included a $187 million SME-friendly tax package to cover the new system. Other changes proposed include allowing contractors to more easily choose a withholding tax that suits their business and stops the ongoing 1 per cent monthly penalty for late payments.

“MYOB is committed to helping small businesses to succeed. We’re hugely supportive of these changes and look forward to building them into our cloud accounting software products. The new system will mean business owners spend less time worrying about tax and compliance and more time focusing on growth,” says Mr Scollay.

For more information and to make a submission visit www.makingtaxsimpler.ird.govt.nz

ENDS

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