Small and medium businesses in New Zealand will get a $3 billion boost through tax breaks to help them ride out the worst of the impending economic crisis.
Finance Minister Grant Robertson’s announcement today focuses this latest initiative on vulnerable but viable businesses with a focus on cashflow and confidence.
The new measures include:
- $3.1 billion tax loss carry-back scheme.
- $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 IRD flexibility for affected businesses to meet their tax obligations.
- law will be changed to take some pressure off commercial rents to support commercial tenants and landlords.
The initiative is light on the specifics of how it will work in practice. The highlight of the package is the tax loss carry-back scheme which will allow many businesses to access their previous year’s 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.
It has been indicated that this announcement is simply the next step on top of the $20m support package already provided via:
- wage subsidy program
- business loan guarantee scheme
- mortgage deferral scheme
There is however a recognition of more to come via next phase of support for households and businesses. This could include a potential reform and extension of wage subsidy scheme. Further government spending in an attempt to keep unemployment below 10%.
Cashflow is one immediate problem for small business, which the government is wanting to help fix through the tax system. We are however light on detail of how this will work in practice and will keep you updated as further details become available.