Government announces new tax and business relief measures for Covid-19

15 April 2020

The Minister of Finance announced this morning a number of new Covid-19 business relief measures including some tax changes which will assist New Zealand businesses. The full detail has not yet been provided but is expected shortly. We will provide an update in due course. The new measures, as we currently understand them, include:

Tax Loss Carry-back

If a business incurs a tax loss for the 2019/20 or 2020/21 tax year it will be possible to carry this back to the preceding tax year rather than have to carry it forward to the next year under the existing rules. This means that businesses will be able to obtain a refund for tax already paid for the preceding year and may choose to reduce or cancel the final payment of 2020 provisional tax which is due on 7 May 2020 for most businesses.

Further consideration will be given to making a loss carry back rule ongoing as from the 2021/22 year.

Tax Loss Continuity

Under existing rules, companies must have a continuous common shareholding of at least 49% to carry forward tax losses from one year to the next. These rules will be relaxed for the 2020/21 tax year so that losses can be carried forward even if the shareholding changes more than 51% so that continuity falls below 49%. This recognises that many businesses may need to attract new shareholders to introduce more capital into the business. The loss of tax losses under existing rules is seen as an impediment to attracting new capital. However, a new “same or similar business” requirement, similar to Australia, will be introduced to prevent tax loss trading.

Flexibility to Meet Tax Obligations

Inland Revenue was recently given discretion to remit use of money interest charges that would otherwise arise on late tax payments. The Commissioner of Inland Revenue has stated that her discretion to remit both use of money interest and late payment penalties will be favourably applied where tax payments are late due to covid-19. Under today’s announcements, the Commissioner will have additional discretion to change due dates and other timeframes and procedural requirements. The detail of how these additional discretions will be applied has not yet been announced.

$25 million Business Consultancy

The Government will fund $25 million in business consultancy fees for businesses needing additional support. Few details are yet available.

Extension of Cancellation Timeframes for Leases and Mortgages

The standard timeframes for landlords to cancel leases and mortgagees to call up loans have been extended as follows:

Commercial leases - 20 working days to 80 working days (40 days for notice to cancel plus 40 days to actually cancel)
Mortgages of land – 20 working days to 40 working days
Mortgages of goods – 10 working days to 20 working days.

Commercial Rent Subsidy

Disappointingly there was no announcement on a much anticipated commercial rent subsidy to further help businesses and commercial landlords manage through this period.

Disclaimer:This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.

The above is very brief summary of announcements and should not be relied upon as advice.

Please contact your usual Bentleys‘ advisor if you require any specific advice.

Roger Thompson

Roger Thompson
Phone: +64 9 600 3902

Stay in touch. Please do not hesitate to contact your client advisor.

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