Second COVID-19 tax Bill passes through all stages
On 30 April 2020, the COVID-19 Response (Taxation and Other Regulatory Urgent Measures) Bill (240-3) was introduced into Parliament under urgency and passed through all stages. The Bill now awaits the Royal assent. This is the second taxation Bill in response to the COVID-19 induced economic crisis. The first taxation Bill was enacted on 25 March 2020 as the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020.
The Bill amends the Income Tax Act 2007, the Tax Administration Act 1994, the Child Support Act 1991, the Animal Welfare Amendment (No 2) Act 2015, the Public Finance Act 1989, the Crown Entities Act 2004, the State Owned Enterprises Act 1986, and the Credit Contracts Legislation Amendment Act 2009.
The measures in the Bill involve changes to income tax, tax administration, primary industries, consumer protection and Crown-owned entity regulatory requirement measures. Some of these measures include:
- bringing forward the commencement date of certain protections relating to high-cost consumer credit contracts
- deferring the commencement of provisions that restrict the performance of minor surgical procedures on animals during the lockdown so that farmers can continue to perform these, and
- extending the time frame for certain Crown entities to provide planning documents to responsible or shareholding Ministers.
The tax policy measures contained in the Bill are as follows:
Temporary loss carry-back regime
A tax loss carry-back measure will allow businesses that anticipate being in loss in either the 2019/20 or 2020/21 tax year to carry some or all of that loss back to the preceding year where profits were earned. This is intended as a temporary measure to provide fast cash flow relief for businesses in loss during the period affected by COVID-19. The measure provides for a one-year carry-back. The Government has indicated its intention to develop a permanent loss carry-back mechanism to apply from the 2021/22 tax year. The longer-term regime may be more traditional, such as not allowing a refund before the loss has been established and may have more integrity measures to cover some technical risks. The longer-term regime may provide for a one-year or two-year loss carry-back. Almost all types of taxpayers – companies, trusts and individuals – are eligible to carry back losses. The majority of individuals who are taxed through the PAYE system do not have losses and so will be unaffected by this measure but those that operate businesses through partnerships, limited partnerships, and look-through companies will be able to benefit.
The Tax Administration Act 1994 has been amended to give the Commissioner the flexibility to quickly provide an extension of due dates, timeframes or modify other procedural requirements for taxpayers who are impacted by COVID-19. This discretionary power could be applied for any due date, timeframe, time period, procedural or administrative requirement across tax or social policy obligations set out in the Revenue Acts and the Unclaimed Money Act 1971. This power will be limited to an 18-month period which could be extended by Order in Council and to initiatives which are taxpayer friendly.
Small business cashflow scheme
The Tax Administration Act 1994 has been amended to authorise the Commissioner, on behalf of the Crown, to lend money under the Small Business Cashflow (Loan) Scheme. The scheme has been launched by the Government to assist eligible small to medium businesses that have been adversely affected by COVID-19. A number of other amendments support the introduction of the scheme and ensure that Inland Revenue can use its powers to administer it. The Income Tax Act 2007 has also been amended to ensure that the conversion of a portion of the loan to a grant will not have adverse income tax implications for the applicant.
Tax and Social policy treatment of pension and benefit equivalent payments
Amendments have been made to the Income Tax Act 2007 and the Tax Administration Act 1994 to ensure payments made under the COVID-19 New Zealanders Stranded Overseas Support Ministerial welfare programme in lieu of another payment normally payable under the Social Security Act 2018, New Zealand Superannuation and Retirement Income Act 2001, or Veteran’s Support Act 2014 are subject to the same tax treatment as those payments. Amendments to the Child Support Act 1991 also ensure that when such payments are made and the person is a receiving carer for child support the usual child support rules apply.
Further information about the Bill is available at www.taxpolicy.ird.govt.nz.
Source document: Inland Revenue
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