Business support for Covid-19
Government support package to assist businesses
Here are some key details about Government support for businesses affected by COVID-19. If you need help accessing these benefits, or have questions about what to do, give us a call and ask us first.
After 10 June, once your existing Wage Subsidy payments have been exhausted, you will be able to apply for the Wage Subsidy Extension, provided that your revenues are down 40 per cent for a 30 day period in the 40 days prior to your application, but no earlier than 10 May.
This seems complicated, but mean that (for example):
- if you apply on 10 June, you need to be able to show a 40 per cent drop in revenues from 10 May to 9 June;
- if you apply on 20 June, you need to be able to show a 40 per cent drop in revenues for a 30 day period between 10 May to 19 June;
- f you apply on 3 July, you need to be able to show a 40 per cent drop in revenues for a 30 day period between 25 May and 2 July;
- the 30 day period needs to be consecutive, but it is the total revenues over that 30 day period that is counted.
It does depend on your sales, but in a practical sense, retailers will be most likely to be eligible if they can apply earlier.
The Wage Subsidy Extension will last eight weeks, and you can read more about the detail - and the restriction that apply on the Work and Income website.
Wage subsidies will be available for all employers that are significantly impacted by COVID-19. The scheme will be open to sole traders and the self-employed as well as SME and large businesses.
For an employer to be eligible for the subsidies, they must demonstrate their business has suffered, or is projected to suffer, at least a 30% decline in revenue compared to last year for any month between January 2020 and the end of the scheme in June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.
Eligible businesses to receive $585.80 per week for a full-time employee (20 hrs or more) or $350.00 per week for a part-time employee (less than 20 hrs). The payment will be made as a lump sum for a period covering 12 weeks. This means employers will receive a payment of $7,029.60 for a full-time employee and $4,200 for a part-time employee.
Other employer responsibilities:
- Employers will need to declare that, on their best endeavours, they will continue to employ affected employees at a minimum of 80% of their income for the duration of the subsidy period (12 weeks).
- Where it is not possible for employers to pay employees at least 80% of their income - in particular for businesses with no activity whatsoever due to the shutdown and workers are not working any hours - employers must pass on at least the whole value of the wage subsidy to each affected worker. Where an employee's income is normally less than the subsidy, they should be paid their normal salary.
- Employers must also have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank/financial advisor) and sign a declaration form to that effect.
Employers can apply from 17 March and for the duration of 12 weeks. Applications can be made through an online portal on the Work and Income website. MSD will aim to make first payments no later than five working days from when applications are received.
The COVID-19 leave payment scheme provided support for those people unable to work who were in self-isolation, sick with COVID-19, or caring for others with COVID-19. This scheme was in place from 17 March - 27 March, but is no longer available or fit for purpose due to the nationwide lockdown and the wage subsidy scheme.
However, if your workers are considered essential, there are some leave entitlement options available to you. You can find out more here.
Depreciation on commercial and industrial buildings
Depreciation deductions will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels. This will help support businesses with cashflow in the near-term and assist with the broader economic recovery by stimulating business investment in new and existing buildings. Reinstating building depreciation will support longer-term economic productivity and macroeconomic objectives by:
- encouraging investment in business premises and decreasing the cost of such premises over time;
- improving business confidence; and
- enabling the capital cost of seismic strengthening of buildings to be depreciated.
Immediate deductions for low value assets
Taxpayers will be able to deduct the full cost of more low-value assets in the year they purchased them, rather than having to spread the cost over the life of the asset. Taxpayers are currently able to claim an immediate deduction for the purchase of assets that cost less than $500. This threshold will be further increased to allow the immediate expensing of assets that cost up to $5,000, for a year (2020-21 income year). The threshold is being permanently increased to $1,000 (from 2021-22 income year onwards). This will take effect for expenditure made on or after 1 April 2020 for most taxpayers.
Fewer small businesses having to pay provisional tax
Increasing the threshold for having to pay provisional tax from $2,500 to $5,000 allows more small taxpayers to delay paying their taxes. This means they have until 7th February following the year, they file to pay their tax, instead of having to pay in instalments throughout the year. This lowers compliance costs for smaller taxpayers and allows them to retain cash for longer. Taxpayers that would have otherwise been paying provisional tax in the 2020-21 tax year will now be able to pay their tax on 7th February 2022 - providing immediate cashflow benefits estimated to be $350 million in the 2020/21 fiscal year.
Writing off interest on some late payment of tax
The Commissioner of Inland Revenue will be given the power to waive interest on late tax payments for taxpayers who have had their ability to pay their tax on time significantly adversely affected by the COVID-19 outbreak. Use of Money Interest (UOMI) is routinely charged on late tax payments. The relief will apply to interest on all tax payments (including provisional, PAYE, and GST) due on or after 14 February 2020.
New tax support
The Government has announced further tax proposals to help business manage the impacts of COVID-19. These include:
- greater flexibility for taxpayers in respect to tax deadlines
- changes to the tax loss continuity rules
- a tax loss carry-back scheme.
Find out how this might apply to your business by viewing the guidance on the Inland Revenue website.
New business support
The Government has announced a further $25 million in funding for the Regional Business Partner Network (RBPN). Approximately $4 million will go to help strengthen call centres to ensure more people can access the service quickly. Roughly $20 million will be invested in the direct business consultancy services to ensure that a wider range of businesses can get the support they need.
Insolvency relief for companies impacted by COVID-19
New legislation is underway to help companies facing insolvency due to COVID-19. Companies Office has more information about these changes, which you can see here.
Business Finance Guarantee Scheme
The Government has launched a Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.
Under the scheme, businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years. The scheme will offer a total of $6.25 billion in loans to New Zealand businesses.
The Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%. A normal lending process will be followed by the banks, which will make the lending decisions.
For more information about this scheme and how to apply, visit COVID-19 business finance support and mortgage holidays.
Temporary loss carry-back scheme
If your business is expected to make a loss in the 2020 or 2021 year, you can use that loss to offset profits you made the year before. Inland Revenue has info to help.
Scenarios - wage/leave entitlements from Government support package
The purpose of the wage subsidy is to help keep people employed - that includes yourself! If your business is registered in NZ and experiencing a decrease of at least 30 per cent in revenue compared to the same month last year, then you can apply directly to MSD for the wage subsidy here.
If your employee is sick with coronavirus, taking care of someone who has the virus, or is required to self-isolate, you are not required to pay them sick leave or annual leave. This is where the leave entitlement is accessible to you. There is no maximum amount for this leave, meaning you can access this leave payment for the full 14 days required for self-isolation, or as long as it takes to for employee to get well. You must reapply for this leave every 14 days.
If your employee is accessing the leave entitlement due to COVID-19, you are not required to use their leave entitlements to top up their income. However, you are able to offer and negotiate with your employee if they would like to use any form of paid leave.
Example: Your employee earns $1,000 a week before tax and is required to self-isolate. They are entitled to $585 a week from the Government's leave payments. They ask you to use annual leave they have accrued to make up the other $415 in order to receive an income consistent to what they would receive if they were working their normal hours.
In order to know which wage subsidy is right for your casual employees, it is best to average their hours worked over a 4 week period. This will determine if they are considered to be part time (less than 20 hours) or full time (more than 20 hours).
We know times are tough. If you are in the position where you must reduce staff numbers due to the current circumstances, please get in touch with our Business Advisors for guidance or request our specialised template. We encourage you to provide a note to affected employees outlining that this is due to the current climate, so that it doesn't hinder their ability to get another retail job in the future.
As announced on March 19, non-residents and non-citizens will not be allowed to enter the country for the foreseeable future. It is recommended to source locally for new employment opportunities.
Unfortunately, it is highly unlikely these employees will be allowed back into the country unless they meet the exemption criteria outlined by Immigration.
Should you find that redundancies are necessary, the same process as usual applies, however given the circumstances, discussions can occur over the phone/skype and timeframes will be shorter. Get in touch with our Advice Service for guidance on redundancies as a result of Covid-19.
Useful Links - resources to answer your questions
- Unite against COVID-19
- Work and Income COVID-19 Wage Subsidies and Leave Payments Factsheet
- Employer Application for Wage Subsidies and Leave Payments
- Work and Income - COVID-19 Response
- Employment NZ - COVID-19 Support page
- NZBN for sole traders
- Border closures, exemptions and migrant workers
- Employment related privacy issues
Learn about the different ways our Business Partners are offering support to you, through the COVID-19 crisis.
As you navigate this time, please don't hesitate to contact our Advice Service should you require any assistance. You can ring us on 0800 472 472 (1800 128 086 from Australia) or send us an email on email@example.com. We are here to support you - so ask us first.
Updated on 8th June 2020.