There is not a lot in the latest budget for small business – but then again there is not a lot to hurt small business either. In line with this governments approach to information management, there were not a lot of surprises – but that was because most of the content was released in the month or so before the budget.
Most of the changes will impact individuals, not business. The increase in the rate of student loan repayments, removing the under $9880 income, child care and house keeper tax credits will have little impact for business.
However, the removal of the tax credit for wages earned by school children may increase the compliance costs for small business. At present a school child who earns less than $2,340.00 per year is not required to pay tax (PAYE) as they would get a tax credit for that income and a refund at year end. So employers do not include those payments in their payroll or PAYE returns each month – in future they will have to, so that will be be more work to do.
Changes to the mixed-use asset rule will reduce deductibility for those more well off small business owners who own holiday homes and boats – but the impact will not be widely felt.
The government has allocated another $78 million to IRD for policing tax which is similar to the increase given last year. So small business may well feel the impact of increased IRD scrutiny and audit – especially in the areas of the “cash economy”, debt collection and unfiled returns.
On the whole, small businesses are happy when the tax environment and government fiscal policy is stable. Forecast GDP growth seems reasonable for small business albeit propped up by the unfortunate need for the Christchurch re-build. The current government through this budget and its general policy is taking a cautious approach to spending and debt – and that should provide the stable economic platform that small business looks for, albeit with the proviso of the international market situation that will always be a risk for New Zealand.
Mike Hartley is director of Small Business Accounting, Newmarket, Auckland