Home
Printed from the Franchise New Zealand Website - www.franchise.co.nz
< Running A Franchise Outlet : Financial Matters
Tax Changes: What they mean for franchising
Craig Weston
18 February - Franchise specialist Chartered Accountant Craig Weston from Inspired Business Solutions has been pondering the effect on franchisors and franchisees of the tax changes announced earlier this month
The Government's recent announced a package of tax changes aimed at stimulating the SME sector - which includes most franchised operations. At least one franchisor was unimpressed , but in fact there are some benefits. Here are Craig's comments on some of the key points:
Reducing the provisional tax uplift rates for the 2008/09 and 2009/10 income years. The 105% rate goes down to 100% and the 110% rate to 105%. Craig's comments Will help with cash flow, but as always Franchisors and Franchisees will still need to monitor how their profitability is going so as not to unduly overpay or underpay provisional tax.
Reducing the use of money interest rate for underpayment of tax from 14.24% to 9.73% and for overpayment from 6.66% to 4.23% from 1 March 2009. Craig's comments While this is helpful, one would have hoped for more of a % reduction on the underpayment side. In many cases the interest is tax deductible. In some circumstances you may find this rate is cheaper than bank overdraft rates.
Raising the GST registration threshold from $40,000 to $60,000; and the GST payments basis threshold from $1.3 million to $2 million. Craig's commentsThe threshold matter should not really affect the Franchise community - most will be registered for GST anyway. The increase in payments basis threshold change could be considered, but would depend on each individual case eg if you have a lot of month end debtors but few creditors, a change in basis could be of advantage.
Allowing businesses with $10,000 or less of business-related legal expenditure a full deduction of the expense in the year it was regardless of whether it is capital or revenue in nature. Craig's comments This is good - in a practical example - the legal costs of setting up for a normal Franchisee will be deductible, rather than not so, as previously was the case. It reduces the initial effective cost by a 30% tax saving (assuming a company structure).
Raising the PAYE once-a-month filing and payment threshold from $100,000 to $500,000 of PAYE. Craig's commentsThis will definitely help a number of small businesses. Paying PAYE once a month on the 20th rather than twice a month will be less hassle and also assist with cash flow.
Raising the FBT annual filing threshold from $100,000 to $500,000; raising the value of minor fringe benefits that can be provided to employees without attracting FBT to $300 per quarter per employee and $22,500 a year per employer. Craig's comments Will mean less paperwork during the year and some cost savings in some cases.
Reducing the FBT prescribed interest rate for low-interest, employment-related loans from 10.90% to 8.05% raising some of the thresholds relating to accrual expenditure from 1 January 2009; and adjustments. Craig's comments Will assist but in our experience with our clients, this won't have a huge effect.
'In summary.' Craig says, 'the changes are welcome - but we would have liked more!'
Free Magazine!
Send for a free copy of our print magazine, the authority on buying a franchise.
Featured Businesses
