Coronavirus: Government package offers $3.2b worth of tax and business assistance

Tuesday, 14 April 2020

The Government's latest $3.2b coronavirus support package includes tax breaks, business advice and help for tenants and landlords.

Finance Minister Grant Robertson said the new assistance would provide relief for small and medium-sized (SMEs) businesses during the Covid-19 pandemic, adding to the $20 billion of support already announced.

By far the largest portion of the package is a tax loss carry-back scheme estimated to cost $3.1b over two years.

Small businesses, such as cafes, have watched their cash flow dry up to nothing under the level 4 lockdown and they have been looking for some longer term financial relief from paying full commercial rent. (File photo)

Businesses will also get more flexibility over tax deadlines, along with $25m worth of free specialist advice, and extensions to timeframes for cancelling commercial leases or proceeding with mortgagee sales.

While essential workers are being recruited for the supermarket sector, major job losses are on the horizon. A worst case scenario released by Treasury showed unemployment could peak at between 17.5 and 26 per cent, with the higher figure resulting in about 690,000 people out of work.

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Tax changes

Robertson said the latest announcement was a continuation of efforts to cushion the impact of the coronavirus pandemic through measures to boost cashflow and confidence.

'We need our businesses to stay solvent to help with the economic recovery as we emerge from this health crisis.

'We have approved a tax loss carry-back scheme that will allow a large number of businesses to access their previous tax payments as cash refunds. Essentially this means a forecast loss in the current financial year can be offset against the tax paid on a profit from last year.'

Robertson said changes to tax loss continuity rules would make it easier for firms to raise new capital without losing the benefit of their existing tax losses, and that would save business an estimated $60m annually.

A decision on whether or not to exit the four week lockdown will be made on April 20.

Inland Revenue would also be given greater flexibility for dealing with businesses affected by Covid-19, which could include extending deadlines for filing tax returns and paying provisional and terminal tax for up to 18 months.

Commercial properties

Businesses unable to trade during the lockdown have been increasingly anxious about their ability to pay rent on commercial premises, and some were hoping for something akin to the 6 month rent freeze for residential property rents.

Instead the Government has extended the notice required for the cancellation of leases, and for mortgagee sales or repossession of properties.

Justice Minister Andrew Little said many businesses may be finding it difficult or impossible to pay rent if they were no longer able to access their property, and if landlords were not receiving rent, they may not be able to meet their mortgage obligations.

Landlords will have to give 30 days notice to cancel a lease, up from the current 10 days.

Little said this would be for both the period the tenant was in arrears before the notice is given, and for the period to remedy the breach.

'The Government will also extend the timeframes for lenders from 20 to 40 working days for mortgaged land, and from 10 to 20 working days for mortgaged goods.

'This will apply to commercial mortgages and home loans. However, the already announced mortgage deferrals are likely to be the first port of call for residential borrowers.

'These measures will ensure an orderly process to deal with commercial lease disputes caused by Covid-19,' Little said.

Business advice

Over the next 12 months the Government will also pour $25m into free specialist advice for SMEs.

The scheme would use established services such as the Regional Business Partner Network, and helplines run by the Employers and Manufacturers Association and Canterbury Chamber of Commerce.

Minister for Small Business Stuart Nash said some businesses were struggling to meet their non-wage fixed costs, such as interest, rent and insurance, but were not currently in a position to take on additional debt.

'In the absence of further support from the Government, these otherwise viable SMEs may be forced to close down permanently.

'We don't want that to happen, so as well as the tax measures which should provide some cashflow relief, we are going to provide tailored support services to help businesses weather the storm, at no charge to the business.

'This could range from human resources advice to business continuity planning to financial management,' said Nash.

Legislation enacting the changes announced on Tuesday will be introduced on April 27 and will apply effectively retrospectively once the bill is passed.

The latest business support package includes:

· $3.1b tax loss carry-back scheme (estimated cost over the next two years)

· $60m 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 affected businesses to meet their tax obligations

·Extension of notice required to cancel leases and reposess commercial properties