A significant package of tax reforms will be pushed through all stages in Parliament today to throw a cash flow lifeline to small businesses.
Revenue Minister Stuart Nash says the COVID-19 Response (Taxation and other Regulatory Urgent Measures) Bill gives businesses more than $3 billion in tax refunds as they deal with the economic impact of the virus.
“This response delivers the single biggest government support package to businesses via the tax system in modern New Zealand history, and more is yet to come,” Mr Nash said.
“As the Prime Minister and Finance Minister have said we are constantly monitoring the situation for business and adjusting our support as required. Just yesterday we indicated additional support will be coming for commercial leases.
“We will keep supporting business and jobs where we can to cushion the blow of the virus and ensure New Zealand is well positioned for recovery.”
“Today’s changes mean cash could start flowing to businesses via the tax system as early as next week. Many small and medium enterprises (SMEs) are feeling the pain now. We are moving urgently to get cash into their hands as quickly as possible, by taking current losses back to a prior year.
“My strong advice to businesses is to talk to their accountant, bookkeeper or tax agent, or log onto the MyIR portal as quickly as possible to ensure they take advantage of the government support as soon as changes come into effect this week.
“The tax refunds will be a cash lifeline for businesses with non-wage fixed costs, like rent, interest and insurance. Some don’t want to take on extra debt with a bank loan. Without this support these otherwise viable SMEs may be forced to close.
“The changes were signalled two weeks ago and design features have now been finalised after discussions between Inland Revenue and external tax practitioners. I am grateful to the accounting and legal profession and IR officials for their rapid work on this legislation.
“The omnibus bill deals with tax and regulatory changes to support businesses and others get through the economic shock caused by COVID. The main measures will:
• introduce a tax loss carry-back regime to provide cash flow quickly to businesses, by allowing losses to be carried back one year;
• allow IR to change due dates, timeframes or other procedural requirements for tax returns for taxpayers affected by COVID-19;
• ensure the treatment of benefits and pensions paid to New Zealanders stranded overseas is consistent with the treatment of equivalent payments in New Zealand;
• bring forward the commencement date of certain protections relating to high-cost consumer credit contracts;
• prevent famers and others working with animals having to call in vets to undertake minor surgical procedures during the lockdown; and
• extend the timeframe for certain Crown entities to provide planning documents to responsible or shareholding Ministers.
“Other tax changes just before the lockdown involved a $2.8 billion support package for business.
“It gives $2 billion in tax deductions to landlords through depreciation on commercial buildings. It removes 95,000 taxpayers from the provisional tax regime by raising the tax threshold to $5,000; allows businesses to claim back more for spending on low-value assets like laptops and phones; and allows interest to be waived on late payments.
“The wage subsidy has also been a vital factor in small business survival. Around 97 per cent of businesses who received the subsidy are either sole traders or firms employing fewer than 20 staff.
“More than $1.25 billion has been paid to about 188,000 sole traders. A further $4.27 billion has gone to 160,000 small businesses that employ between one and 19 staff. Almost 8,900 medium-sized firms, with 20-99 staff, have been paid $1.3 billion.
“SMEs can also call on government support to pay for professional advice to plan for survival and recovery from the economic shock caused by COVID. A $25 million business consultancy fund will pay for tailored specialist support such as business continuity planning, finance and cash flow management, HR and staffing issues.
“The global pandemic and economic crisis is hitting every nation hard. We are moving to cushion the blow for businesses and workers in this country as Alert Level 3 opens up the economy to prepare for recovery,” Mr Nash said.