Minister wants later application date for small-business tax changes
Revenue Minister Peter Dunne has recommended delaying the 1 April application date of three small-business tax changes in a bill under consideration by Parliament's Finance and Expenditure Committee.
In a letter to the chairman of the committee, Mr Dunne explains that businesses need more time to prepare for the changes, given that the proposed legislation was not enacted this year as originally anticipated, and is not expected to be enacted until March.
The three measures for which he is recommending a deferred application date are the alignment of GST and provisional tax due dates, allowing businesses to base provisional tax payments on GST turnover, and introduction of the new subsidy for use of PAYE intermediaries by small businesses.
Contact: Ted Sheehan, Chief Press Secretary to Hon Peter Dunne
Tel: 04 470 6985, Cell: 021 638 920
Mr Shane Jones MP
Finance and Expenditure Committee
The Taxation (Depreciation, Payment Dates Alignment, FBT, and Miscellaneous Provisions) Bill makes tax easier for small businesses by allowing them to align the provisional tax payment dates with GST due dates, thereby reducing the number of payment dates they have to cope with. A related change allows small businesses to base their provisional tax payments on a percentage of their GST turnover, which will be particularly helpful to those that have mostly seasonal income.
The bill also introduces a subsidy for the voluntary use of PAYE intermediaries by small businesses. Its aim is to encourage employers of up to five staff to outsource their payroll obligations - including making deductions for income tax, student loans and child support - so they have more time to run their business.
The unfortunate delay in the passage of the bill because of the election could adversely affect a variety of taxpayers and businesses subject to these proposals.
Taxpayers who are affected by the proposals will be seeking information on the changes and confirmation that they will be in effect from 1 April 2006. Businesses would normally now begin preparing for legislative changes that apply from 1 April 2006. As the legislation is not expected to be enacted until March 2006, Inland Revenue are unable to provide the necessary information to businesses and confirm the application date of the legislation. Also, any changes made by businesses now will not reflect the changes to the legislation made at the select committee stage or later. Furthermore, a March 2006 enactment date will not provide sufficient lead-in time for Inland Revenue to provide information to businesses and for businesses to make the necessary changes by 1 April 2006. This situation can cause confusion and increase compliance costs for businesses.
For these reasons I have instructed officials to recommend in the officials' report to the Finance and Expenditure Committee that the application dates of the three reforms be delayed. The proposed new application dates are as follows.
- The first part of the proposal to align provisional tax and GST payment dates is to change the GST due date. I recommend that the Committee consider delaying the change for one year, from 1 April 2006 to 1 April 2007.
- I also recommend that the Committee consider delaying the application date of the proposal to align the provisional tax payments with GST due dates and to base provisional tax payments on a percentage of GST turnover for a year, from the 2007-08 income year to the 2008-09 income year.
- With regard to the application date of the proposal to provide a subsidy to employers who engage a payroll agent, I recommend that the Committee consider delaying the proposal for six months, from 1 April 2006 to 1 October 2006.
Delaying these application dates will assist taxpayers in their preparations for changes that come into force when the bill is enacted.
I ask that the Finance and Expenditure Committee consider the changes to these application dates when it considers the bill.
Hon Peter Dunne
Minister of Revenue