The Prime Minister announced a business tax package yesterday which is to start taking effect from the 2018 income tax year (1 April 2017 for most). The package is a step forward for IRD’s ‘Making Tax Simpler’ project.
The main changes announced are:
- Extending safe harbour to non-individual taxpayers and raising the threshold to $60,000 so that paying last year plus 5% will not incur any interest.
- Removing use of money interest from the first and second provisional tax payments in a year for all taxpayers using the standard uplift method.
- Allowing SMEs to pay provisional tax through accounting software based on the accounting profit from the software (effective 1 April 2018 as IRD’s computer system comes online).
- Removing 1% monthly incremental late payment penalties from unpaid tax as this was proving to be a barrier to compliance (the immediate penalty of 1% and month later penalty of 4% remain).
- Allowing companies to pay income tax on behalf of shareholders.
- Simplifying fringe benefit tax (FBT) for closely-held companies, deductions for dual-use vehicles and resident withholding tax (RWT) exemption certificates
Changes were also announced for contractors, providing more flexibility on the withholding tax rates that can be applied.
IRD will also commence information sharing on tax debt with credit agencies and the Companies Office.
Feedback is being sought on the implementation of the proposals. In the meantime, Findex will be reviewing these changes to ensure our clients can maximise the benefits when the time comes. Our initial view is that most of these changes are extremely positive in concept, but some work is required to understand the detail. For example, at which point will bad debtor information be shared and what safeguards will be put in place.
If you have any questions on this topic, please contact your local Findex tax adviser.