Wage Subsidy Extension

A Wage Subsidy Extension payment will be available to support employers, including sole traders, who are still significantly impacted by COVID-19 after the Wage Subsidy ends.

The Wage Subsidy Extension will be available from 10 June 2020 until 1 September 2020 so employers can keep paying their employees. You can’t apply for the Wage Subsidy Extension for an employee until their 12 week Wage Subsidy has finished.

Applications open from 10 June 2020.

Here are the key points you need to know:

  • You must have had, or expect to have, a revenue loss of at least 50% for the 30 days before you apply, compared to the closest period last year.
  • It will cover 8 weeks per employee from the date you submit your application.
  • It will be paid to you as a lump sum at the same weekly rate as the Wage Subsidy.
  • You’ll need to agree to certain obligations, such as to:
    • pass the subsidy on to your employees
    • retain your employees for the duration of the subsidy
    • do your best to pay your employees at least 80% of their normal pay
    • take active steps to mitigate the impact of COVID-19 on your business.
If you think this may apply to your business or situation, contact us now to discuss on (06) 878 8824.

 

Small Business Cashflow Loan Scheme

As another measure to assist eligible small-to-medium businesses adversely affected by COVID-19, the Government has launched the Small Business Cashflow Loan Scheme (SBCS).

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

Inland Revenue will administer the scheme. Applications are open through myIR from 12 May 2020 to 12 June 2020. To apply, select ‘Apply for a Small Business loan’ In the ‘I want to’ section of myIR.

What you need to apply

To apply for the SBCS loan you need to:

  • provide your New Zealand Business Number (NZBN) – obtain one, if you don’t have one
  • confirm that, due to COVID-19, your business is suffering a minimum 30% drop in actual or predicted revenue in the period January 2020 to June 2020
  • confirm your business or organisation:
    • existed before 1 April 2020
    • is viable and ongoing, you have a plan to ensure it remains so, and you are keeping evidence to document this
    • will use the loan to pay for core operating costs (such as rent, insurance, utilities, supplier payments, or rates)
    • will not pass the loan through to the shareholders or owners, for example, by a dividend or a loan
  • confirm you:
    • have appropriate authority to commit your business to this loan. We can’t apply for you and nor can other tax agents, bookkeepers, other representatives
    • are 18 years or over and have the legal right to apply for this loan
    • are aware Inland Revenue are not providing financial or other advice about the loan
    • agree to the loan terms
  • provide the number of your full- and part-time employees, if you have not already provided this when applying for the wage subsidy.

Keep in mind

If you provide false or misleading information or receive any subsidy or payment you were not entitled to, you may be subject to investigation, including for offences under the Crimes Act 1961 or the Tax Administration Act 1994.

After the initial two-year period (when repayments aren’t compulsory), Inland Revenue will notify you of the regular instalment repayments required. If you miss repayments, you will be charged interest at 3% plus the use of money interest rate (currently 7%).

Under certain circumstances, Inland Revenue may consider you to have defaulted on the loan (the terms currently available set out what constitutes an ‘Event of Default’). In such circumstances, the outstanding amount will become immediately due and payable, and subject to interest at 3% (if the event of default has happened after the initial two-year period) as well as use of money interest.

Keep your longer-term finance strategy in mind. For instance, if you plan to go to your bank for funding over the next three years, consider how they will view your application if you already owe up to $100,000 plus interest to the government via Inland Revenue. It may tip the balance against your funding application. If you’re not in desperate need of working capital right now, your long-term relationship with your bank may be your better option.

Our Recommendation

Speak to us about whether the SBCS loan is right for your business and if you need support with your application. Call us on (06) 878 8824.

Wage Subsidy COVID-19

By now, many whose businesses have been affected by COVID-19 have applied for support through the wage subsidy. If you are one of them, keep in mind that the subsidy comes with specific conditions.

If you haven’t yet applied for the subsidy and you are an employer, click here to apply. If you are self-employed, click here.

We want to help you keep your business afloat and keep your team together. If anything changes that may affect your eligibility or entitlement to the subsidy, you must notify the Ministry of Social Development (MSD) within 5 working days. Let us know if we can help.

Main Requirements

If you are entitled to the subsidy:

  • your business has experienced a 30% decline in actual or predicted revenue because of COVID-19 and you have taken active steps to mitigate the impact. This includes talking to your bank, drawing on cash reserves, making an insurance claim. You need to be able to provide evidence of the impact on your business and the steps you have taken
  • as an employer, you:
    • do your best to pay your employees 80% of their pre COVID-19 income for the period of the subsidy. If this is not possible then you pass the entire wage subsidy on to employees. This applies to all employees, and they all must at least receive the full value of the subsidy. Where the ordinary wages or salary of an employee was lawfully below the amount of the subsidy before the impact of COVID-19, you can pay the employee that amount.
    • must retain employees for the period of the subsidy
    • should not compel employees to take their leave to receive the subsidy. Leave requirements for employees remain unchanged

Your Declaration and Obligations

When you applied for the subsidy you made a declaration about your business and how you would use the subsidy, including that:

  • you operate a business and any employees named in your application are legally employed (in New Zealand)
  • you discussed the wage subsidy application with employees and obtained their consent (preferably in writing):
    • to provide information to MSD
    • to information sharing between MSD and other agencies (including non-government agencies).
    • to advise MSD of any employees ending their employment during the subsidy period

You have also consented to the MSD publishing information about your business and the level and duration of any subsidy provided to you on a publicly available register.

The subsidy commits you to retaining and paying your employees. You can only vary employment agreements with employees with their agreement. You agree to repay the subsidy or part of the subsidy if you:

  • fail to meet any obligations
  • provided false or misleading information
  • receive insurance such as business interruption insurance for any costs covered by the subsidy

You may be subject to civil proceedings to recover any amount received that you are not entitled to and/or to prosecution for offences under the Crimes Act 1961.

Contact us if you’d like more detail about the implications for your business.

Support for Beneficiaries and Super-annuitants

Main benefits will rise by $25 per week from 1 April 2020.

From 1 July 2020, working families with children who don’t receive a main benefit and have some employment income each week won’t have to satisfy the hours test to receive the In Work Tax Credit (previously a minimum of 20 hours a week for sole parents and 30 hours a week for couples with children). These are introduced as permanent changes.

As a temporary measure, the Winter Energy Payment to superannuitants and beneficiaries will double in 2020, beginning on 1 May 2020. This means $40.91/week for single people and $63.64/ week for couples or people with dependents.

COVID-19 Leave Payment Scheme

Cash top-ups for workers, contractors and the self-employed

A leave payment scheme runs for the next 8 weeks, providing support to businesses with employees, contractors and the self-employed staff unable to work because they are in isolation, or sick, or caring for others with COVID-19. The payment amounts are the same as those for the wage subsidies and can be backdated to 17 March 2020.

This does not affect any paid leave entitlements owed and is available even if an employee is on paid leave for part of the period. It is not available to those who can work from home, and whom their employer can pay normally.

Employers can apply for the leave on behalf of any self-isolating or sick employee. The Ministry of Social Development (MSD) pays employers, who are required to pass it on to affected employees. MSD will pay on a fortnightly basis once it receives an application.

Employees, self-employed, and contractors legally working in New Zealand are eligible. Those who self-isolate must do so in accordance with public health guidance and register with Healthline. Those who went overseas from 16 March 2020 are not eligible for this payment for self-isolation on their return. Workers ill with the virus can only access the scheme for time spent on sick leave from 17 March 2020.

Business Cashflow Help

From the Government’s response to COVID-19

Tax relief measures for the government’s economic response to COVID-19 include:

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 an 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 a 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.

Wage Subsidies for Employers Affected by COVID-19

From 17 March for the next 12 weeks, wage subsidies are available for employers affected by COVID-19 and struggling to retain employees. Employers may apply who suffer (or project they will suffer) a 30% or more decline in revenue for any month between January 2020 and June 2020 (compared to last year). Applications may also be based on forecast revenue loss within the period.

The subsidy is:

  • $585.80/week for a full-time employee (20 hours or more);
  • $350.00/ week for a part-time employee (less than 20 hours).

The lump-sum payment covers 12 weeks. The maximum an employer can receive is $150,000.
Under the scheme, employers:

  • undertake to continue to employ affected employees at a minimum of 80% of their income (eg 4 out of 5 days of the week) during the subsidy period
  • must have been active to lessen the impact of COVID-19 (eg. engaged with their bank or financial advisor) and sign a declaration form to that effect

You can apply for the subsidy through the Work and Income website. MSD aims to pay no later than five working days from when applications are received.

One of the requirements of the subsidy payment is that employees must give consent for their employee to provide information about them to the Ministry of Social Development (MSD). Here is a simple privacy waiver that you can request your employees’ sign: Employee Consent.