The government’s latest COVID-19 support package includes further measures to try and ease the pain of the lockdown. It includes ‘tax breaks’, business advice funding and guidelines for tenants and landlords.
At first glance it seems this package, unfortunately, may not do a lot for small businesses and leaves a lot to be desired. There are no in depth details available yet, so we will have to hold on, likely until 27th April.
Tax Loss Carry-Back Scheme
A large portion of the package is the tax loss carry-back scheme which will allow some businesses to access previous tax payments as refunds. Essentially this means a forecast loss in the current financial year can be offset against the tax paid on a profit from the prior year. Basically 2 tax years become 1 year.
This scheme relies heavily on perfect forecasting for more than 11 months into the future. Any mistakes in the calculations or forecasts will result in Use of Money Interest being charged by the IRD, likely back to early in the 2020 tax year when the adjusted provisional payments will have arisen originally.
This scheme has the potential to help some larger, more established businesses with steady monthly turnover year to year, but really does nothing for growing or smaller businesses with less certain profitability.
We recommend that in the short-term, your efforts are much better spent looking at ways to make your business thrive after lockdown. Don’t distract yourself with this poorly thought out policy until it actually has some usable detail or some tweaks that make it more applicable to the businesses its supposed to help.
Commercial Landlords and Tenants
The Government has announced its intention to put in place some temporary law changes to support commercial tenants and landlords impacted by COVID-19. The goal is to make it easier to keep lease arrangements and get back to business as usual after the epidemic. Many businesses have been unable to operate due to the level 4 lockdown alert, so they may have difficulty payment rent. Landlords, in turn, may have trouble making mortgage payments.
Important Note: Landlords and tenants will not receive financial support in the form of cash payouts.
The temporary bill that is set to come is designed to give commercial tenants more time to catch up on overdue rent before a landlord can take steps to evict them.
- For the next three months, landlords can’t apply to end the tenancy for rent arrears unless the tenant is at least 60 days behind in rent.
- Landlords will have to give 30 days notice to cancel a lease, up from the current 10 days.
The official advice for tenants that can’t pay their rent is to let their landlord know right away. Be honest about the situation and get a payment plan in place.
If you will continue to have trouble, you may be able to access financial support from the Government’s Wage Subsidy and Leave Payment scheme that is available to eligible employers and workers.
We hope to have more details on this after April 27th, but please get in touch with us if you have any questions.
The business.govt.nz website is regularly updated with the latest COVID-19 news and announcements for businesses.
Are you Worried about Cashflow?
If you’re worried about your cashflow, please don’t hesitate to get in touch with us.
We will do all we can to help you implement cash management processes and forecasting techniques to help. There are also some finance options available to you as well. Facilities may be provided quite quickly, so just ask if you need some help and we’ll work out what’s best for you. Remember, we are in this together.
We have the ability to provide you with FREE cashflow forecasting software for the next three months. Reach out to the team to talk to us about your options.
Thank you for your continued support and patience as we work to wade through government packages, announcements and updates each week. Please get in touch if you have any questions.
We are in this together.