Cash flow and insurance fears for earthquake-hit firms

The next 60 to 90 days will be critical for earthquake-affected Christchurch businesses, with many facing substantial issues around cash flow, insurance and their leases, the New Zealand Institute of Chartered Accountants says.

The institute has held two forums to identify issues facing Canterbury members and their clients. CEO Terry McLaughlin said cash flow was a major one.

The Government's wage subsidies had been "a godsend" but there was concern about what would happen when they ended.

The complexities of business-interruption insurance were also a worry. "I haven't got my head around [it] and what it means," he said.

The institute had heard that interim payments due under some policies were "pretty small".

A lot of businesses were finding out the hard way about the consequences of cheaper insurance. Businesses that had been forced to relocate were also facing problems getting out of existing leases.

"The mere fact you've been denied access to your building is not sufficient grounds. A lot of people are going to be caught with leases on two properties."

But it welcomed Christchurch-related tax measures Revenue Minister Peter Dunne announced this week. They include a tax break on donations of goods to the earthquake relief effort.

Wellington tax agent Jeff Owens had been lobbying for donations of goods to be treated the same way as cash donations, which attract a 28c-in-the-dollar tax rebate.

Until now donated goods were deemed to have been sold for market value and the profits taxed accordingly.

But the Government says businesses do not have to pay tax or gift duty on trading stock they have donated within four months of either the September 4 or February 22 earthquakes.

Owens said he would have preferred to see a wider exemption but "it's certainly a move in the right direction".

Other measures include removing tax on cash payments or in-kind benefits of up to $3200 given to employees within eight weeks of the quake and granting Inland Revenue discretion to extend statutory tax dates.

However, institute tax director Craig Macalister said there was still a lot of work to be done on issues such as the tax treatment of insurance payouts.