New measures announced to help small and medium-sized business manage the impacts of COVID-19…

Many small and medium-sized enterprises (SMEs) are experiencing a downturn in revenue as a result of COVID-19, and the restrictions imposed worldwide to help combat its spread.  In addition to support packages already in place, on 15 April 2020, the Government announced additional measures to help SMEs manage non-labour related fixed costs. 

Existing measures:

The Government has put in place several measures to help SMEs manage financially difficult times, especially when it comes to retaining their employees.  Key measures include the introduction of a Wage Subsidy Scheme and an Essential Workers Leave Scheme.  

Unfortunately, some SMEs will not generate enough revenue to pay their fixed running costs (for instance commercial rent), even with the subsidies.  To help with other costs, the Government introduced a Business Finance Guarantee Scheme, a Mortgage Holiday Scheme, and tax amendments. 

• The Business Finance Guarantee Scheme allows business to borrow up to $500,000  from their bank with an 80% Government guarantee to help them get through the next three years. 
  
  
• The Mortgage Holiday Scheme and the tax amendments aim to free up cash flow.

Some SMEs are not, however, able to take on additional debt under the Business Finance Guarantee Scheme, and may not be able to survive without further support from the Government.  

Additional new measures:

The Government has announced that it will be putting in place additional new measures, including:

• A tax loss carry-back scheme, whereby businesses get a tax refund for tax paid in previous years, due to more recent losses. 
  
  
• For a period of 18 months, the IRD will have flexibility to modify deadlines and procedural requirements.
  
  
• Changes to the tax loss continuity rules, (whereby businesses can offset positive income with previous losses even though there has been a change in ownership).
  
  
• Commercial tenants, will have more time to remedy breaches and defaults before landlords are able to cancel leases.
  
  
• Mortgagors will have more time to remedy breaches and defaults before mortgagees can exercise their powers (for instance mortgagee sales). 
  
  
• Businesses will be able to access free, tailored specialist support for a range of issues and existing advisory services will also be extended so that more businesses can receive help to understand the support available to them.

“We need our businesses to stay solvent to help with the economic recovery as we emerge from this health crisis…” said Finance Minister Grant Robertson. “Our focus on cashflow and confidence continues through these measures. […] In the absence of further support from the Government, these otherwise viable SMEs may be forced to close down permanently. […] We don’t want that to happen.”

Legislation enacting the changes will be introduced on 27 April and will apply retrospectively once the bill is passed.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins, we have an experienced family law team, who can answer your questions and put you back on track.