Bold new measures to help NZ business as Government steps-up its support over COVID-19 troubled waters
Earlier today, Finance Minister Grant Robertson announced some “bold” new tax and other assistance packages for NZ business. These herald some long-awaited relaxation in our loss utilisation rules, and some breathing space for commercial tenants and mortgagors. The announcement is high level only, and it remains to be seen whether Treasury or IRD officials might interfere with brakes applied in the legislative detail.
1. Tax loss carry back – this is bold and new, and allows businesses to gain some much needed immediate cash relief; but, you need to take some care as you take advantage of this new relief measure.Businesses suffering tax losses in this 2020/2021 income year will be able to “carry back” the loss to a prior period and release previously paid income tax. What’s more, this relief measure may be taken advantage of before you finalise your 2021 year-end position.We recommend work is undertaken to establish your current period position. If a tax loss looks likely and is “reasonably certain” this can be used to reduce your income tax liability for the 2019/2020 income year. This may mean no tax payment is required for your third and final provisional tax payment on 7 May 2020. However, if you get it wrong, the resulting prior period tax shortfall will cost you penal interest at 8.35%. We can guide you through this and help you with your modelling and your compliance to reduce your cash outlay and to obtain a speedy refund of previously paid taxes.
2. Tax loss carry forward, same business test – companies with accumulated tax losses and in need of additional capital are the beneficiaries here. At last, the COVID-19 burning platform has accelerated this tax reform NZ Private Capital has been striving for over a long period. This tax reform now means new investment changes in shareholding will no longer result in tax losses being forfeited provided the company continues in the “same business”. VCFO have been a long advocate for this law change to bring us in line with overseas tax regimes and remove barriers to venture capital, private equity and SME investment. As is often the case, the devil will be in the detail and we will get on top of this to help you.
Many SME businesses are already looking at their capital injection options and this measure should assist. Give us a call at VCFO to discuss all this.
3. Tax administration processing relaxation – at the IRD’s discretion, timeframes for filing or paying tax may be extended (application period limited to 18 months, COVID related delays), and also earlier measures may allow tax penalty and interest relief.
There’s a lot within all these measures so let us know how we might assist you to ease your tax burden.
4. Commercial tenants – an extension to the standard notice period for commercial lease cancellations from 10 working days to 30 working days (for both the period the tenant is in arrears before the notice is given, and for the period to remedy the breach).
5. Mortgaged land or goods – an extension from 20 to 40 working days for mortgaged land and from 10 to 20 working days for mortgaged goods, applying to both commercial and home mortgages (although residential mortgagors are expected to access the repayment holidays in preference to this relief).
Contact us to discuss the position if you are concerned about your ability to meet obligations under any funding arrangements; we can assist in liaising with your providers, considering the government’s Business Finance Guarantee Scheme and/or with projections in support of any proposals.
6. Business advice services – more funding is also announced for business advisory services (e.g., the EMA and commerce chamber helplines).
More details to come; legislation will be introduced on 27 April. The government’s announcement and factsheet are linked below: