The Government's $3.1 billion tax relief package for small businesses has been labelled grossly inadequate by the Auckland business community, who says it fails to provide the "cash in the hand" desperately needed.

Heart of the City chief executive Viv Beck represents the interests of 10,000 central Auckland businesses, and said Tuesday's business support package "falls short of the mark" in a lack of direct financial support and commercial rent assistance.

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On Tuesday, Finance Minister Grant Robertson announced a tax relief package for small and medium sized businesses that he described as a tax "loss carry-back mechanism".

Under it, businesses will be able to offset a loss in a particular tax year against a profit in a previous year, and receive a "cash refund" of the tax paid in that previous profitable year.

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"Essentially this means a forecast loss in the current financial year can be offset against the tax paid on a profit from last year," Robertson said.

Businesses closed along Queen St, Auckland central, during the Covid-19 lockdown. NZ Herald photo
Businesses closed along Queen St, Auckland central, during the Covid-19 lockdown. NZ Herald photo

It is estimated to cost the Crown about $3 billion over two tax years and is the first significant new support measure on top of the $20 billion programme already under way.

However, Beck said this tax offset did not address the most pressing cash flow issues created by the Covid-19 lockdown.

"While there are tax measures that will help some businesses, this will not get cash in the hands of businesses that desperately need money to pay for fixed costs like rent," Beck said.

"In Auckland's city centre, many businesses have been impacted by construction and expecting these businesses to survive a global pandemic without direct financial support to pay fixed costs is unrealistic."

In the week beginning March 30, Heart of the City reported retail spending in the city centre plummeted to $1.1m on essential purchases, versus $26.8m in the same week last year.

In response to the criticisms of the tax relief package, Minister for Small Business Stuart Nash said there was already a range of government assistance for small businesses - both directly targeted at wage costs, and more indirectly by buffering the banking system.

"This tax relief immediately frees up cash flow which can be applied to fixed non-wage costs, such as rent, power bills, insurance, and so on," Nash said.

"Other small business support is being delivered through the tax system, and will shore up those businesses that were viable before Covid-19, but are vulnerable now.

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"Some of the first tax relief payments under the loss carry-back changes are expected to start flowing by late May."

Nash also put the onus on banks to be the primary source of financial relief for small businesses.

"For small businesses that are struggling with immediate fixed costs, the first port of call remains their bank," Nash said.

"The Government is working alongside banks with the Business Finance Guarantee Scheme and I urge small businesses and banks to have those conversations as soon as possible.

"The scheme is designed to enable banks to provide credit to customers where otherwise the bank may not be willing to do so."

Heart Of The City CEO Viv Beck is heavily critical of the Government's small and medium business tax relief package. Photo / NZ Herald
Heart Of The City CEO Viv Beck is heavily critical of the Government's small and medium business tax relief package. Photo / NZ Herald

But owner of Auckland central business Rapid Radio, Robert Charteris, said the lack of detail in the package suggested it was "just talk".

"I think they're treating us [business owners] like idiots. The general public will swallow it up," Charteris said.

"They're wanting us to estimate a loss [on 2020 revenue] in an environment we have no control or idea of. They're asking us to have crystal balls.

"We could make a profit at the end of 2021. What happens then? Is there a fight on that where we have to pay back the tax that we took off the 2020 tax period? Am I going to be taken to the cleaners by the IRD?"

Size Gift Shop in Mid City Arcade off Auckland CBD's Queen St closed during the Covid-19 lockdown. NZ Herald photo
Size Gift Shop in Mid City Arcade off Auckland CBD's Queen St closed during the Covid-19 lockdown. NZ Herald photo

Pita Pit managing director Duane Dalton said the relief package was likely to just confuse and add stress to their 100-odd franchises across New Zealand.

"I think it was far from sufficient and extremely poorly put forward," Dalton said.

"Anything that gets put forward in a format that requires small businesses to go and seek further professional help at their cost to even understand it, is simply going to set them back further.

"The reality is for a lot of these franchisees at the moment, they just need cash support."

The Coffee Club NZ director Brad Jacobs also said the package had "absolutely missed the mark unfortunately".

Another major disappointment for Heart of the City was the lack of relief on commercial rent for small and medium businesses.

The rent measures in the business package extend the timeframe required before landlords can cancel leases and mortgagees can exercise their rights to sale or repossession.

Finance Minister Grant Robertson announced a business relief package for small and medium sized businesses on April 14. Photo / Getty Images
Finance Minister Grant Robertson announced a business relief package for small and medium sized businesses on April 14. Photo / Getty Images

Changes to commercial rent rules would extend the current 10 working day timeframe that commercial landlords may cancel the lease to 30 working days, said Minister for Justice Andrew Little.

This will be for both the period the tenant is in arrears before the notice is given, and for the period to remedy the breach.

But Beck said this provided no helpful relief to tenants or landlords when no business trading was occurring.

"The measures announced do not get to the nub of the issue between tenants and landlords," Beck said.

"Discussions are vital so a fair outcome is achieved for both, but there is no mechanism to work out what is fair in a situation like this.

"We had highlighted that this issue needs Government action as there is a major issue for tenants who can't afford to pay their rent, and also for landlords if rents are not paid.

"It is not fair to expect either tenants or landlords to bear the brunt of a situation that is completely out of their control."

Auckland Central MP Nikki Kaye said recent surveys from the Auckland Chamber of Commerce and Restaurant Association indicate that thousands of businesses in central Auckland are in risk of permanently shutting their doors due to the lockdown.

National's Nikki Kaye says recent surveys show that thousands of businesses in central Auckland are in risk of permanently shutting their doors. Photo / NZ Herald
National's Nikki Kaye says recent surveys show that thousands of businesses in central Auckland are in risk of permanently shutting their doors. Photo / NZ Herald

"Unfortunately the package missed the mark and if the Government doesn't do more thousands of jobs will go," Kaye said.

"These small businesses want to hang on but have been pushed off a cliff and can't save jobs unless the Government does a bit more.

"Parts of central Auckland will be a ghost town with vacant shops if they don't move on this.

"The Government needs to be forensic about ensuring when we get to level 3 so as many businesses can operate as safely as possible."

Other measures announced yesterday include changes to the tax loss continuity rules - estimated to cost $60 million and funding for $25 million worth of business consultancy support.

The business support package announcement comes a day after Treasury released scenarios showing that unemployment could potentially be kept below 10 per cent with additional fiscal stimulus of at least $20 billion.

Covid19.govt.nz: The Government's official Covid-19 advisory website