Change to tax rules

Jeremy Tauri.

A few of my friends in business have sent me elated texts and emails about the recent announcement of changes to the provisional tax system.

This is a big deal for business: In business and as an accountant in public practice, we have always been continually counting down to these provisional tax dates spread out across the year.

The reminders we send to clients generally aren't their favourite news. It's almost like they forget it is coming even though we talked to them about the payments due months before.

In the past the once-a-year financial statement bash has been a traditional tragedy for the first-year provisional taxpayer, a double whammy of taxes in one year that no one was mentally or financially prepared for.

And so the good news is from April 1, 2018, a new pay-as-you-go system for businesses turning over less than $5 million has been announced. This is in contrast to the current provisional tax system that requires three payments per year. Cloud software programs providers Xero and MYOB will be used to calculate tax payable falling in line with GST payments. I'm hoping that more businesses will use the software sooner.

The benefit of this is that we will have businesses paying more attention to their financial results regularly. Even if it appears it's just for taxes this will spill into better record-keeping and tax knowledge as well as making sure cash flow is managed properly and payables and receivables are monitored. This is much easier to maintain frequently then play catch-up at year end. It will also mean the focus will be on better business practice than compliance catchup.

Use of money interest, a charge on taxes you perhaps should have paid won't apply - over a year at 9.2 per cent this is a costly extra.

- Jeremy Tauri is an associate at Plus Chartered Accountants.