Tax Loss Carry Back Scheme

There are two parts to this scheme: the first is the Temporary Tax Loss Carry-Back Scheme.

In summary, this scheme allows a business expecting to make a loss in either the 2019/20 year or the 2020/21 year to be able to estimate the loss and use it to offset profits in the past year. In other words, they could carry the loss back one year.

This change means businesses could receive a refund of some, or all the tax already paid for the year they were in profit. Currently losses can only be carried forward until a profit is made.

Please note for companies a loss can only be carried back and the tax refunded where the company has enough imputation credits.

The IRD has advised taxpayers to do not need to rush to re-estimate their provisional tax before 7 May. Part of the proposed law change would make it possible for businesses to re-estimate it after the date of the final instalment. This will give them more time to work out any estimated loss for the 2020/21 income year.

The second part is the Permanent Loss Carry-Back Scheme.  In this scheme the government proposes a permanent loss carry-back scheme, applying to the 2021/22 and later income years. Further public consultation is to occur on this in the second half of 2020.

Tax Loss Continuity Rules

Currently, if a company has more than a 51% change in ownership it cannot keep its tax losses, i.e. it must have at least 49% continuity in ownership.

The Government proposes relaxing the tax loss continuity rules. It intends passing legislation before the end of March 2021, and for it to apply to the 2020/21 and later income years.

The introduction of a ‘same or similar business’ test, means a business could carry forward losses even with a change in ownership. To meet the test, the business must continue in the same or a similar way it did before ownership changed. This test is modelled on Australia’s rules.

Further detail is to come on these changes, and Alliotts will update you these as they are released.

ALERT Level 3 - The Waiting Room

1. Workers must work from home if they can.
2. Workplaces must operate safely if they are open – keeping one metre between workers, recording who is working together, limiting interaction between groups of workers, disinfecting surfaces and maintaining high hygiene standards. Prime Minister Ardern referred to Forestry as a type of business that could now open as they could not work from home.
3. Retail and hospitality businesses can only open for delivery and contactless pre-ordered pickup – customers cannot enter stores. This does open up e-commerce channels for these businesses.
4. Supermarkets, dairies and petrol stations can continue to allow customers into their stores with the same restrictions and measures in place as Alert Level 4.
5. Businesses cannot offer services which involve face-to-face contact or sustained close contact (e.g. hairdressing, massage, house cleaning or door-to-door salespeople).
6. Other in-home services can be delivered if it is safe to do so (like tradespeople for repairs or installations) but they must keep two-metre separation from those in the house.
7. Most workers will not require PPE to stay safe at work. Incorrectly used PPE can create more risk. Good hygiene measures like handwashing with soap and water, physical distancing, sneeze and cough etiquette and wiping down surfaces is the best defence against COVID-19.

NZ in lockdown

Please reach out to our team via email, website, Zoom or phone us on +64 9 520 9200. Many of you already deal with us exclusively via these methods and will experience no service change. We are very experienced in working remotely and welcome any enquiries you may have.