Since late March, the Government has announced a number of measures to support small and medium-sized businesses get through the COVID-19 crises.
Although applications have now closed, many businesses have applied for support through the wage subsidy. If you are one of them, keep in mind that the subsidy comes with specific conditions. It’s worth a check to ensure that you meet the criteria and if not, that you take steps to repay the subsidy. Failure to do so may result in civil proceedings to recover any amount received that you are not entitled to and/or to prosecution for offences under the Crimes Act 1961.
For more information go to https://www.workandincome.govt.nz/covid-19/wage-subsidy/index.html
Wage Subsidy Extension
If you’re still significantly affected by COVID-19, you may be able to get the wage subsidy extension with the new eight-week scheme which was available from 10 June 2020. You can apply for the extension even if you didn’t apply for the original wage subsidy. However, you can't receive more than one COVID-19 payment for the same employee at the same time.
Similar to the wage subsidy, there are specific criteria to meet to qualify for the wage subsidy extension. Firstly, your business must have experienced a 40% drop in revenue because of COVID-19 for a continuous 30-day period. This period needs to be in the 40 days before you apply (but no earlier than 10 May 2020) and must be compared to the closest period last year.
For more information and to apply for the wage subsidy extension, go to https://www.workandincome.govt.nz/covid-19/wage-subsidy-extension/index.html
Small Business Cashflow Loan Scheme
From 12 May 2020, businesses employing up to 50 full-time staff may apply to the Inland Revenue Department for loans of $10,000 plus $1,800 per employee. The loans:
- accrue interest at the rate of 3% for a maximum term of five years
- will not be liable for interest if repaid within 12 months, and
- require no repayments for two years, although voluntary payments can be made at any time
Inland Revenue will administer the scheme. Applications opened on 12 May 2020 and can now be submitted up to and including 31 December 2020. To apply, select ‘Apply for a Small Business loan’ in the ‘I want to’ section of myIR.
Free Business Consultancy Support
Businesses are able to access free, specialist support for issues including business continuity planning, finance and cash flow management, HR and staffing issues, and potentially any sector-specific issues. The Regional Business Partner Network has scaled up advisory services, so more businesses receive support over the next year.
For more information go to https://covid19.nzte.govt.nz/page/regional-business-partner-network
Tax and ACC Support
A number of new measures have been designed to help businesses with their tax.
Depreciation: Depreciation deductions for commercial and industrial buildings will be re-introduced from the 2020/21 income year. Available to all sectors, these apply to new and existing buildings on a permanent basis. Building owners can adjust provisional tax payments immediately in anticipation of the additional deductions.
Write-offs: As a two-stage incentive to encourage spending, tax write offs will be available for more low-value assets. Initially, for the 2020/21 income year, assets costing up to $5,000 will be eligible for immediate write-off. As a permanent measure, from the 2021/22 income year, the existing $500 threshold will increase to $1,000.
Provisional tax: Currently, taxpayers with residual income tax of $2,500 or more pay provisional tax. From the 2020/21 tax year, this threshold will increase to $5,000, so fewer businesses will need to pay provisional tax.
Interest: Businesses and individuals who are struggling because of COVID-19 and can demonstrate they’re unable to pay tax by the due date may be eligible for a use-of-money interest (UOMI) write off. This applies to all tax payments including provisional tax, PAYE and GST due on or after 14 February 2020, for two years, unless the Government extends it. Inland Revenue will release details on how they will test this.
Other measures include:
- a tax loss carry-back scheme
- changes to the tax loss continuity rules
- greater flexibility for taxpayers in respect of statutory tax deadlines
- measures to support commercial tenants and landlords
ACC levy invoices for the 20/21 financial year would usually have been sent from 1 July, but will now be sent in October.
Business Debt Hibernation
Business debt hibernation helps companies, trusts, and other business entities affected by COVID-19 to manage their debts. Unfortunately, sole traders aren’t eligible for business debt hibernation.
If business debt hibernation is right for your business, this is how it helps you manage your debts.
You set up an arrangement for your existing debts, eg paying your creditors only a percentage of what you owe them on time and delaying the rest.
You get up to a month of protection while you set up the arrangement, meaning most creditors can’t enforce their debts, eg applying for your business to be liquidated.
If your creditors agree, you get a further six months of protection.
You can find more information at https://www.business.govt.nz/covid-19/business-debt-hibernation/
Business Finance Guarantee Scheme
This initiative has been launched 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.
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.
As you can see, there is a substantial amount of support currently being provided by the Government to support our businesses through these uncertain times. If you are struggling with the impacts of COVID-19 and would like to discuss your situation, please give us a call.