5 Feb 2009

Small business tax help worth $480m unveiled

9:06 am on 5 February 2009

Prime Minister John Key has announced tax changes worth $480m over the next four years, targetted at helping small and medium-sized businesses.

Mr Key announced the relief package to a business audience in West Auckland on Wednesday morning.

He said the package is aimed at urgently improving the business environment by reducing the impact of taxes on firms' cashflow.

There are 11 tax changes costing $480 million, including new rules for provisional tax payments and lower interest rates on underpaid and overpaid tax.

Other tax changes include a higher GST payment and registration threshold and allowing more employers to file their PAYE paperwork once a month, instead of twice.

There are also changes to fringe benefit tax, spending on legal items and other compliance costs.

Mr Key has also announced an expansion of the export credit scheme and an extension to the jurisdiction of the Disputes Tribunal - allowing it to handle cases worth up to $20,000.

Mr Key said the small business relief package will lighten the load on small and medium sized businesses and is part of a broader plan for jobs and growth.

He says the immediate saving this year is likely to be about $245 million, easing small firms' cash flow problems at a time when the economy is in recession.

Mr Key says taken together with other steps - including personal income tax cuts which come into effect from 1 April and increased infrastructure spending - the Government is pumping a lot of money into the New Zealand economy to blunt the worst effects of the global downturn.

The Labour Party says the measures are underwhelming, given the economic outlook. Finance spokesperson David Cunliffe says the previous Labour Government had been working on similar changes, and in some cases the party would have gone further.

Mr Cunliffe says businesses really need to know what the Government's "grand plan" is to address the deteriorating economy, so confidence is not shaken further.

Tax strategy welcomed

Business New Zealand chief executive Phil O'Reilly says the package will help with small businesses' cashflow problems.

He said such firms often have small capital requirements, but if they have a cash flow problem, they may go under.

Council of Trade Unions secretary Peter Conway said tax changes should help firms to hold on to their workers.

A Canterbury business owner said the new tax strategy will help support small and growing businesses.

Sheryl Stivens is the general manager of Wastebusters, a recycling company in Ashburton. She said her company has been looking for ways to create jobs and maintain quality within the struggling recycling industry.

Mrs Stivens said the new measures will help support efforts to employ more people and encourage local enterprise, and she is looking forward to seeing the effects on business in coming months.

Meanwhile, Mr Key has signalled he will give details next week on plans for bringing forward infrastructure spending.

He has said the Government is also considering insulating homes as part of the response to the recession, despite earlier rejecting the previous Labour-led Government's policy.