A taxing issue

What do you think of the government’s proposed tax reforms aimed at SMEs, and how do you think they could benefit your business?

Firm: Wren Building Ltd
Principal: Simon Wren
Location: Whakatane
Staff: 12

Our view on the proposed tax reforms is that they’re long overdue and we wholeheartedly support a revision of the present system.

Our business has been affected enormously by the current provisional tax system. We have grown relatively rapidly and it’s only through our own regular and careful assessment of our figures that we have not incurred penalties or received a shock at the end of the accounting year.

The current provisional tax system involves a fair amount of crystal ball gazing and therefore adds another level of administrative and accounting responsibility. That would hopefully be eradicated with a pay-as-you-go system, which is something we would most certainly opt for.

We will be following the proposals closely. If the changes come into effect as they’re proposed on paper, it will help us enormously. It will remove the present uncertainty surrounding provisional tax and therefore assist in assessing where the business figures lie in real time. Also, being able to incorporate this into our accounting software will be helpful.

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Firm: Quality Construction Ltd
Principal: Dan Albert
Location: Porirua
Staff: 3

In my opinion, the SME tax reforms will be good for our industry. Any measures designed to streamline business processes and reduce guesswork will assist with raising productivity.

The current provisional tax rules are ‘cart before the horse’. A pay-as-you-go system is a much fairer option for both the taxpayer and tax collector. The upshot is a possible reduction in SMEs going to the wall come the end of the year, when they discover there is not enough money left in the kitty for tax.

Changes to the withholding tax rule, where contractors are able to choose the tax rate that is appropriate to them, will reduce the ‘rags to riches’ effect the current rules have on their income. In many cases, contractors get a refund at the year’s end – so effectively they’ve waited 12 months to get fully paid, which is hardly fair.

The question for me is why not have a single pay-as-you-go system for both provisional and withholding tax?
We are one of a growing number of businesses already using a cloud-based accounting system (Xero), so changing to the new provisional tax and rates rules is as simple as one click.

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Firm: Ian Trainor Building Ltd
Principal: Ian Trainor
Location: Twizel
Staff: 4

Whether tax is paid every two months, quarterly, or annually, it still has to be paid; the government tells us what we have to do and how we must comply.

Whatever happens, the system will always benefit the IRD. As for the small business owners, we will have to change our accounting package and take the time to try and get our heads around more changes. We don’t have the luxury of an administrative person to figure it out for us.

You would hope that we’ll end up with a better idea of our finances, although I’m sure it won’t work for every industry. We leave the tax up to the accountant, so I would have to ask him if it’s going to benefit our business.

Do we really need yet another change in the industry though? So much has changed over the last few years: being licensed, health and safety etc.
It’s not something we’d given much thought until being asked the question. At the end of the day, we’ll do as we are advised by our accountant/IRD.

Now have your say…

With liability becoming more pronounced in the building industry, how do you go about choosing and monitoring your subbies?

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Email your answer with your full name, contact phone number, company name, number of full-time staff and the city or town in which you’re based to editor@pmundersconstruction.co.nz.

All responses must be submitted by 25 July 2016. The answers to this question will be published in Under Construction September 2016.