On 15 April 2020 the Government announced a suite of new measures to provide relief for small and medium-sized businesses during the COVID-19 pandemic. The new measures include:

• $3.1 billion tax loss carry-back scheme (estimated cost over the next two years)
• $60 million estimated annual savings to business each year from changes to the tax loss continuity rules
• $25 million in the next 12 months for further business consultancy support
• greater flexibility for businesses affected to meet their tax obligations
• measures to support commercial tenants and landlords.
• Businesses across the play, active recreation and sport sector will be eligible for these additional measures if they meet the criteria for each initiative. More information about these measures can be found on this factsheet.

SMALL BUSINESS CASHFLOW SCHEME

The Government has introduced the Small Business Cashflow (loan) Scheme to support businesses and organisations struggling because of loss of revenue as a result of COVID-19.

The eligibility criteria has been announced and can be found here.

To be eligible your business or organisation must have 50 or fewer full time equivalent employees and be eligible for the Wage Subsidy Scheme. They must also have a sound plan to be viable ongoing and hold information to verify this.

Applications are open from 12 May 2020 up to 12 June 2020. Funds will be received within five working days. The IRD will administer the payments and the loan has a five year term and must be repaid by 31 July 2025. The annual interest rate is 3% but will not be charged if the loan is repaid within one year. In most cases, businesses will be able to borrow $10,000 plus $1,800 per full time equivalent employee to a maximum of $100,000.

A TAX LOSS CARRY-BACK SCHEME

This scheme will enable businesses to offset a loss in a particular tax year against a profit in a previous year and receive a refund of the tax paid in the previous profitable year. The proposed mechanism will provide cash to businesses that are, or anticipate, being in loss.

This change means that the IRD could refund some or all of the tax already paid for the year a small or medium-sized business was in profit. It also means businesses could cash out all or some of their losses in 2019/20 or 2020/21. Without this change, businesses would have to carry forward any loss to a year when they make a profit.

It is estimated that this scheme will lead to refunds and reduced tax bills of $1.2 billion in 2019/20 and $1.9 billion in 2020/21.

More information about this scheme can be found on the IRD website.

CHANGES TO THE TAX LOSS CONTINUITY RULES

These changes mean that businesses will be able to raise additional capital (for example, to remain afloat or to expand their operations). Previous losses can now be carried forward in such situations, where previously the value of the losses would be lost because of the current shareholder continuity test.

The changes give businesses a greater deal of certainty to undertake capital raising. The new rules will apply from 2020/21 and subsequent income years and are estimated to result in savings to businesses of $60 million per year.

GREATER FLEXIBILITY IN STATUTORY TAX DEADLINES

The IRD is to be given greater flexibility to modify timeframes or procedural requirements for taxpayers who are impacted by COVID-19. This could include, for example, extending deadlines for filing tax returns and paying provisional and terminal tax.

At this stage, this flexibility will be time-limited to a period of 18 months. The IRD expect to publish further guidance about this proposal in the coming weeks after targeted consultation with tax advisors.

SUPPORT FOR COMMERCIAL TENANTS AND LANDLORDS

The timeframes required before landlords can cancel leases, and in which mortgagees can exercise their rights to sale or repossession, are being extended.

These changes would still allow landlords to cancel leases and mortgagees to exercise their powers, but they would allow for more time for breaches or defaults to be remedied.

FURTHER BUSINESS CONSULTANCY SUPPORT

Businesses will be able to access free, tailored specialist support on a range of issues, including business continuity planning, finance and cash flow management, HR and staffing issues; and potentially any sector-specific issues.

The Regional Business Partner Network will scale up their existing advisory services so that more businesses can receive support over the next 12 months.

Existing helplines often used by business – those operated by the Employers and Manufacturers Association, and the Canterbury Chamber of Employment and Commerce – will also be extended.

Organisations eligible for this support are those small to medium sized businesses that meet the following criteria:

• An employer of fewer than 50FTE
• GST registered in NZ
• Operating in a commercial environment
• Privately owned, a Maori Trust or incorporation under the Te Ture Whenua Maori Act 1993
• Being impacted by COVID-19