Business support for Covid-19
Government support package to assist businesses
On March 17, the Government announced $12.1 billion support package to assist businesses and Kiwis in the wake of the COVID-19 pandemic. Businesses affected by the Coronavirus will receive an $8.7 billion boost, which includes wage subsidies for all businesses, leave and self-isolation support for employees who are sick or have to take care of sick family members. Additional tax measures have also been taken to help business cashflow and encourage business investment. This support package is only available for 12 weeks. We've highlighted the detail that will be relevant to your business. If you need help accessing these benefits, or have questions about what to do, give us a call and ask us first.
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.
The payments were be $585.80 per week for full-time and $350 per week for part- time workers and should not have impacted any paid leave entitlements that were owed and was available even if an employee was on paid leave for part of the period. It was not available to those who could work from home during the period of self-isolation, and who were able to be paid normally by their employer.
Employers must apply for the leave on behalf of any employee who is self-isolating or sick. Payments can be backdated to 17 March 2020 through 27 March 2020.
Workers taking sick leave before 17 March 2020 can only access the scheme for time spent on sick leave from 17 March 2020. This scheme was not made available for those who travelled overseas since 16 March 2020.
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.
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
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 805 0831 from Australia) or send us an email on firstname.lastname@example.org. We are here to support you - so ask us first.
Updated on 30th March 2020.