COVID-19: The latest updates
[24th of August 2020] - Resurgence Wage Subsidy *UPDATE
The Government have announced another wage subsidy in response to the change in Alert Levels. This is called the Resurgence Wage Subsidy.
This is a 2 week payment and will run from the date you apply and is paid at the same rates as all other wage subsidies. It's open to employees from the 21st of August 2020 through to 11.59pm on the 3rd of September 2020.
You can't receive more than one COVID-19 payment from them for the same employee at the same time which includes all the previous wage subsidies.
Your business must have experienced, or expect to experience, a minimum 40% decline in revenue related to COVID-19 for a 14 day period between 12th of August to 10th of September 2020, this must be compared to a similar period in 2019.
All previous criteria still stand and again we recommend that you talk to your accountant about your eligibility.
[14th of July 2020] - Additional $40m Announced for Regional Business Partner Network *UPDATE
The Government has announced another $40million for the Regional Business Partners (RBP) Network. This funding is made available to support businesses impacted by COVID-19. The focus of this funding is to enable businesses to access professional support by funding for advisory services in the following areas:
- Finance and Cash Flow Management/Tools*
- Business Continuity Planning*
- HR & Employee Relations and Legal
- Health & Wellness
- Marketing Strategy
- Digital Enablement Strategy
* >> Connected Accountants is an approved provider of these services. You can find our services here.
The funding is provided through the Regional Business Partner Network (WellingtonNZ). You will need to register on their platform and have a meeting with an RBP Growth Advisor to access this support. Businesses will need to meet eligibility criteria, which we understand is focussed around the business showing potential for growth (revenue or employees) and having been affected by COVID. It is at the discretion of the WellingtonNZ Growth Advisor.
We advise small business owners to seek out these opportunities to help enable you to undertake exercises with professionals that will aid you and your business in identifying opportunities or mitigating risk during these times.
[30th of June 2020] - Wage Subsidy Extension *UPDATE
The Government had announced a wage
for those employers, including self-employed people, that are still significantly impacted by COVID-19.
Applications are open from 10th of June 2020 to 1st of September 2020.
Your business must have experienced a minimum 40% decline in revenue related to COVID-19 for a continuous 30 day period. The 30 day period must be:
Within the 40 days before you apply
- It is a 40 day window to give employers enough time to calculate their revenue loss and engage with their employees before applying for the subsidy.
Compared to the closest period last year.
- For most businesses, this will be the same period as last year
- If not, then you will need to decide on a different comparison period in 2019 that better reflects the normal pre-COVID-19 revenue for a 30 day period. The comparison period can't go back further than January 2019.
What about if I am applying based on a 40% decline in forecasted revenue?
You can still apply for the subsidy you will just need to show the relevant documents that show that you have had a 40% reduction on what you had forecasted for the period between June 2020 and September 2020.
An example of this would be if you had $60K of confirmed income/contracts for May but those had been pulled because of your clients
restricting spending due to COVID-19.
^^ - We recommend that you talk to your accountant about your eligibility.
[12th of May 2020] - Small Business Cashflow Scheme *UPDATE
The Government has introduced the Small Business Cashflow (loan) Scheme (SBCS) to support businesses and organisations struggling because of loss of revenue as a result of COVID-19. Applications open today - 12th of May 2020 - and will close 31st of December 2020.
Businesses and organisations will be able to apply for the SBCS loan through myIR. In the ‘I want to’ section of myIR, select ‘Apply for a
Small Business loan’. Businesses without a myIR account will need to create one to apply for the SBCS loan and you can found out how here.
Here's the key information:
- To be eligible for the SBCS loan a business or organisation must have 50 or fewer full-time-equivalent employees and be eligible for the Wage Subsidy Scheme. Use this calculator here to figure out how much you would be eligible for.
- ^^ You must have a 'sound plan' to be viable and ongoing and hold information on file to verify this >> business continuity planning, budgets, and cashflows can be considered as having a sound plan.
- IRD will administer the payments and repayments of this scheme. Tax agents will not be able to apply for the loan on behalf of business owners.
- The loan has a five-year term and must be repaid by 31 July 2025.
- The annual interest rate will be 3% beginning from the date of the loan being provided. Interest will not be charged if the loan is fully paid back within one year. Repayments are not compulsory in the first 24 months.
- In most cases, businesses will be entitled to a loan amount of $10,000 plus $1,800 per full-time-equivalent employee, to a maximum of $100,00.
To apply you will need to:
- Provide your New Zealand Business Number (NZBN) - businesses and organisations without an NZBN will need to obtain one before applying for the loan here. >> You can find your NZBN on the companies office website.
- Confirm your business or organisation is experiencing a minimum 30% decline as defined in the wage subsidy scheme.
- Confirm you’ll use the loan to pay for core operating costs (including, but not limited to, rent, insurance, utilities, supplier payments, or rates).
Full SBCS details can be found here on the IRD website. Original article down below.
Recently the Government announced further initiatives to assist NZ businesses to manage the impacts of COVID-19. The announcement can be read here and you can also follow updates as they happen on the Business NZ website and IRD website. The initiatives include:
A Loss carry-back scheme - Businesses expecting to make a loss in either the 2020 year or the 2021 year can use that loss to offset profits they made the year before and reduce tax payable or access a refund of tax already paid.
The COVID-19 Small Business Cashflow Scheme (SBCS) - The Government will provide interest free loans to small businesses adversely affected by the COVID-19 economic shock to support their immediate cashflow needs and meet fixed costs.
New discretion to vary requirement - you can apply to have your obligations with Inland Revenue varied.
Changes to the leave subsidy scheme - an adjustment for level three to extend the support to non-essential businesses.
Tax free payments can be made to employees who are working from home.
Loss Carry Back Scheme
The loss carry-back scheme allows businesses expecting a net loss in either the 2020 or 2021 year to offset that loss against income earned in the previous year. This means that eligible businesses will receive a refund of some or all of the tax paid in that previous year, or can reduce tax that is still due. To be eligible you need to:
- have incurred, or expect to incur a loss in the 2020 or the 2021 tax year
- made a profit and paid tax in the year before the loss was made.
Companies need to also meet these conditions to be eligible:
- The company has maintained 49% common ownership throughout the loss year and preceding year.
- The group has retained 66% common ownership throughout the loss year and preceding year.
- You have a sufficient imputation credit account balance to cover any refund.
How do you access this scheme?
You must let the IRD know that you are going use the loss carry-back scheme. You can do this in the ‘I want to’ section of your income tax account in myIR account, or by contacting your accountant and asking them to do it. Please note that refunds applied for via MyIR will be processed faster.
It is possible to access this scheme for the 2019 and the 2020 tax years. It is our understanding the an extention beyond 2020 is also being considered. At the moment, this initiative helps businesses expecting to make a loss in either the 2020 year or the 2021 year to use losses to offset profits they made the year before.
What are the consequenses?
You'll have access to tax paid in prior years but need to consider that claiming the loss carry back can affect working for families, child support, student loan payments among many other things.
How are shareholders affected?
Unfortunately, assistance does not extend to company profits that were paid out as dividends or shareholder salaries in the preceding year.
Subvention payments made in a preceding year are also excluded.
Shareholder employees who have paid provisional tax because they would receive a shareholder salary in the 2020 year may re-estimate their provisional tax if their company is going to claim a loss carry-back in 2020. This will reduce their shareholder-salary and any overpaid provisional tax will be refunded.
You'll need to get in touch with your accountant as soon as possible, or let IRD know by using the opt-in service in myIR (in the ‘I want to’ section of your income tax account in myIR account). You can then re-estimate your provisional tax up to the time your 2020 return is due or filed. In all other situations the last day for a provisional tax estimation is the 3rd provisional tax instalment date (May 7th in many cases).
The key to this will be accurate forcasting and communication. Talk to your accountant today and read the IRD guidelines,
if you are eligible it is important you communicate via the appropriate IRD channels.
Small Business Cash Flow Scheme - Government Loans
Applications for eligible businesses to apply for a loan from the government will be open from May 12th. The eligibility criteria are intended to be the same as the wage subsidy scheme. The loans from the Government are for small businesses that are adversely impacted by COVID-19 and are intended for operational purposes only. The scheme will provide assistance of up to $100,000 to businesses employing 50 or fewer full-time equivalent employees.
Details of the loans include:
- $10,000 to be provided to every eligible business
- an additional $1800 per equivalent full-time employee
- interest free if the loans are paid back within a year
- an interest rate of 3% for a maximum term of five years
- repayments not required for the first two years.
These terms are very favourable and going by the speed in which the wage subsidy was paid are likely to be accessed faster than a bank loan will be. The loan application is also likely to be more straight forward than applying for a bank loan, even under the loan guarantee scheme. Having said that, if the amount of this loan does not address your cash flow requirements then please feel free to call us and talk through what other assistance may be available.
Inland Revenue will administer the payments and repayments of this scheme and applications will be via MyIR. We will aim to update you as details are released over the next few days via LinkdIN and Facebook. Until then, here's a link to a handy calculator that'll work out how much you can borrow and you can read the media release from the Government here.
Communicating with IRD
Inland Revenue now has a discretion to vary a requirement when it would be impossible, impractical or unreasonable to comply as a consequence of COVID-19. Under this new discretion, you can extend a due date for payment, deadline, time period or timeframe. It is important that you communicate directly with Inland Revenue, both the reasons for your application and around your timeframes for making payments and meeting obligations. The easiest way to get the ball rolling is via MyIR, in the 'I want to' section at the top right of your screen. Alternatively, give us a call and we can help you with this.
Leave Subsidy Scheme
If your employees can't work from home and your business meets the criteria then support may be available in the form of a leave subsidy. This scheme was already in place for 'essential businesses' but as of April 28th has been extended to cover all workers, in line with the level 3 restrictions. Apply via Work and Income NZ, more information can be found here.
Working from home
Inland Revenue has announced that employers can pay employees, who are working from home, up to $20 a week tax-free for expenses such as additional heating costs, without having to estimate or show what the employee's actual expenses were.
Employers can also now make a tax-free payment of up to $400 per employee for furniture costs, without having to work out actual expenses.
This is a temporary response to the Covid-19 pandemic and only applies to payments for expenses incurred between March 17 and September 17 2020.
This determination is not intended to suggest that employers must make such payments to staff who were working from home but eases the admin and tax burden to assist businesses to enable and set their their team up to work from home.
How can your accountant help
We are here to help you with your cash flow and business planning. Right now having clear and insightful advice matters more than
The government has also allocated funding towards consulting services to support businesses impacted by COVID-19. Funding is delivered in the form of vouchers through the Regional Business Partner Network. These vouchers can be used, among other things, to fund specialist services targeted at cash flow, business continuity planning, HR, and wellness.
If you need some help to create and implement your plans get in touch today >> It all starts with hello