Changes to Help Small and Medium Enterprises -2010

Grange Associates Ltd - 15 January 2012

The Taxation (Business Tax Measures) Act 2009 introduced changes, which generally apply from 1 April 2009, to help small and medium enterprises. The main purpose of the new rules is to help smaller businesses deal with the economic pressures currently being faced as a result of the economic downturn. The measures introduced were part of a wider package of relief measures aimed at helping businesses' cash flows and reducing the amount of time that small and medium enterprises (SMEs) must spend on their tax obligations.

As SMEs account for over 95% of New Zealand's businesses it is important that the people who operate them can concentrate on the things that will help their businesses. Improving cash flows and reducing the number of tax returns, payments and calculations SMEs have to deal with will help to ease the tax burden they currently face, and free up time and money to focus on strengthening their businesses.

Key features

The new rules introduce the following changes:
  • a new threshold of $10,000, below which all business-related legal expenditure is fully deductible 
  • a rise in the low-value trading stock threshold, from $5,000 to $10,000
  • extending the methods for businesses to account for financial arrangements
  • a rise in the pay as you earn (PAYE) once-a-month filing and payment threshold, from $100,000 to $500,000
  • a rise in fringe benefit tax (FBT) thresholds, under which accounting for FBT is not required for minor benefits provided to employees. The new thresholds rise from $15,000 a year per employer and from $200 each quarter per employee, to $22,500 and $300 respectively
  • extending FBT annual filing to include closely held businesses whose FBT liabilities are restricted to one or two vehicles used by owner-employees (regardless of their annual PAYE deductions)
  • a rise in the FBT annual filing threshold, from $100,000 to $500,000
  • a reduction in the provisional tax uplift rate from 105%/110% to 100%/105%, to apply from 1 April 2009 to provisional tax payments for the 2008-09 and 2009-10 income years made after these dates. Where certain companies are currently allowed to use uplift ratios of 95%/100% (as a result of the reduction in the company tax rate to 30%), lower uplift ratios of 90%/95% will instead apply
  • a rise in the provisional tax use-of-money interest (UOMI) safe harbour threshold, from $35,000 to $50,000
  • a rise in the Goods and Services Tax (GST) six-monthly return filing threshold, from $250,000 to $500,000
  • a rise in the GST payments basis threshold, from $1.3 million to $2 million
  • a rise in the GST registration threshold, from $40,000 to $60,000
  • minor remedial matters relating to changes made by the Taxation (Urgent Measures and Annual Rates) Act 2008.
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All information is correct at the date of article publication. Please note we provide the information as a service only. Accordingly, the contents are not intended as a substitute for specific professional advice and should not be relied upon for that purpose.   

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