New Zealand is three months out from the "worst time for any business owner", and businesspeople are being warned to be proactive to avoid the crunch.
By Susan Edmunds of RNZ
A new survey of New Zealand accountants has found the provisional tax system is out of step with how businesses, earn, spend and manage cashflow.
John Cuthbertson – tax and financial services leader at Chartered Accountants Australia New Zealand – said one survey respondent had said January 15 in particular was the worst time for a business owner.
This is the date that both GST and income tax payments are due, while revenue was often down because business had been slower over the Christmas period and many clients were just coming back from holiday.
He said the payment dates did not reflect commercial reality and there was misalignment with business cashflow.
"The good news is the system doesn't need to be rebuilt from scratch. Practical changes to improve flexibility could make a significant difference for businesses and the accountants who support them."
Three-quarters of accountants find the date challenging
The research showed 81% of accountants thought their clients' cash flow constraints could affect their ability to pay provisional tax on time. Seventy-seven percent cited that January 15 date as particularly challenging.
In total, 98% of accountants had dealt with a payment issue in the past 12 months including missed payments, clients being charged use of money interest or cash flow related difficulties.
Tax Management New Zealand chief executive Matt Edwards said the biggest barriers were not in tax knowledge.
"They're about timing, visibility and having the right tools to act on information quickly."
Chartered Accountants Australia and New Zealand said the January 15 date should be revised, there should be flexible payment options and better use of technology.
Edwards said too many businesses did not treat their tax obligations as part of their cash flow. "I wish they did."
He said the solution could come from more proactivity and enabling accountants to do more without additional investment.
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"It is difficult for an accountant to have a single page view of exactly where all their clients are sitting in regards to their tax obligations. That requires an investment of time. If their engagement doesn't cover that, it's an invsetment of time they are not remunerated for and generally you don't se enough proactivity around that."
He said the survey showed the system was not broken but there was room to optimise it.
"Tax policy always changes over time and is optimised over time. But I think it's not systematically broken, and I think that's proved in the data. It's the administration burden, particularly on the accounting fraternity to actually manage it that creates the problems. And I think that can be solved through technology rather than necessarily just tax policy.
"I think the tools are there to make this easier. I just don't think we've deployed the tools in the most productive way at the moment."
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