Government smoothes path for small businesses
Self-employed people who pay provisional tax in their first year of business will soon be eligible for a 6.7% discount on that tax, Associate Revenue Minister David Cunliffe announced today. This is part of a raft of measures being introduced over the coming year to simplify tax for small businesses.
"The small business sector is a key driver of growth in our economy but many struggle to make it past the first couple of years. We want to give a hand up based on clear need." Mr Cunliffe said.
"Businesses do not have to pay tax on income earned during their first year until the second year, but both year's payments can be due about the same time - which can be a real financial knock-back for some small businesses.
"We are offering an incentive to first-year self-employed people, and individuals who receive income from partnerships, to make voluntary tax payments during their first year of business. This helps avoid the later strain of paying two lots of income tax very close together. If they take up the offer, they will receive a 6.7% discount for each dollar of tax paid during the first year, to be calculated when their end-of-year tax bill is prepared.
"This is one of several ideas proposed by the government late last year in the discussion document 'Making tax easier for small businesses', and the first to make it into a taxation bill. The bill is expected to be introduced within the next few weeks.
"Other government proposals under active consideration include aligning provisional tax and GST payments, allowing small businesses to base provisional tax payments on GST turnover, and helping small businesses with PAYE.
"Each of the proposals has been the result of extensive consultation with small businesses about ways to make tax easier for them and to reduce the associated compliance costs," Mr Cunliffe said. "The first-year discount proposal, in particular, has received strong support from the businesses we consulted."
Further announcements on the balance of the small business tax simplification proposals can be expected later this year.
Contact: Julian Kersey, Office of Hon David Cunliffe, 04 471 9116, 021 811 999 or [email protected]