After years of protests from accountants and business owners over inequity of the current provisional tax regime, the Government is finally proposing long overdue reforms.
From 1 April 2018, small businesses with turnover under $5 million will no longer have to pay provisional tax in two or three instalments based on the previous year’s income if they adopt the Accounting Income Method.
Using IRD approved software, business income can be calculated every GST period and the corresponding amount of tax paid.
But probably the largest benefit to most small business taxpayers is the abolition of use-of-money interest and incremental penalties on short payments from 1 April 2017. This will apply to income tax, GST and other tax types.
The consultation period on these proposals ends 30 May 2016.