1. Wage subsidy
This is available at the following rates:
- $585.80 per full time employee (working more than 20 hours per week)
- $350.00 for staff (working 20 hours or less per week)
- You must keep all your staff employed.
- You must pay all the subsidy to your staff.
- You must make your best effort to pay your staff 80% of their normal wage.
- You must be able to show a drop of income of over 30% in the period January to June 2020 compared to your previous year due to COVID-19.
- You must also have taken steps to mitigate financial impact on your business, for example, reviewing and cutting costs were you are able to, discussing changes to loan interest repayments with your bank.
2. Leave support scheme
This is available at the same rates as the as wage subsidy but covers a four week period.
Staff must be unable to work and are required to self-isolate due to
- their high risk
- their contact with someone who has had COVID-19,
- or they have been recommended to stay home due to family member who is higher risk by the Ministry of Health
- having COVID-19 and are required to self-isolate until they are cleared by the Ministry of Health
The leave support scheme has similar criteria to the wage subsidy including the 30% decline in income for same period as last year due to COVID-19 pandemic.
3. Cashflow loan
Cashflow loans will be available to businesses with 50 or less full time equivalent (FTE) employees.
- The business must be able to show it is a viable business and able to carry on trading going forward
- The cashflow loan available to each business is based on $10,000 per business plus $1,800 for every FTE employee
- The maximum a business can borrow up to $100,000 but to reach this amount they would need to employ 50 FTE employees
- The maximum available to a sole trader is $11,800.00
- The cashflow loan is interest free if it is paid back within twelve months, otherwise 3% interest is payable on the amount borrowed
- The maximum loan period is five years
- No repayments are required in first two years
The eligibility criteria for the cashflow loan is same as that for the wage subsidy. The money must be used for core business operating costs.
- Applications can only be made via your Inland Revenue MyIR logon and applications are open from 12 May 2020 to 12 June 2020
- You must have a New Zealand Business Number (NZBN) to apply
4. Business Finance Guarantee Scheme
The government has introduced a business finance guarantee scheme.
Under this scheme they will guarantee 80% of a business loan taken out with your bank. The banks bear the remaining 20% risk.
- The loans are available to businesses with revenue up to a maximum of $80,000,000 per annum
- The maximum amount that can be borrowed is $500,000
- The maximum term is 3 years
- The loan cannot be used for property investment, distributing dividends, refinancing debt and no more than 5% can be used for capital assets
- It is available to help business with operating costs
Normal bank lending criteria apply and applications are made through the banks.
Applications close on 30 September 2020 or until all available funds have been allocated.
5. Loss Carry Back
There is a new loss carry back provision introduced to allow business to utilise future expected losses against their current tax liability.
- It allows an estimated or determined loss to be carried back to a prior year.
- The effect would reduce tax payable for that year and may trigger a refund of tax already paid or reduce the provisional tax liability.
- For company’s the amount of tax available to be refunded will be dependent on the credit balance of their ICA account.
The loss carry back provision should be used with caution. If the level of losses estimated is too high there will be interest implications on any tax shortfall.
Any 2020 losses can be taken back and offset against your 2019 income, but we expect the use of this provision to be more relevant for businesses in their 2020/2021 year.
Inland Revenue are still to release how to apply for a loss carry back.
6. Other help for businesses
- The provisional tax threshold for 2021 has been increased to $5000. This is a permanent change going forward.
- The ability to expense assets costing under $5000 GST exclusive if they have been purchased between 17 March 2020 and 17 March 2021. This threshold will reduce down to assets costing $1,000 GST exclusive from 17 March 2021 going forward.
- The depreciation claim on commercial buildings has been reinstated. The rates are 1.5% on Cost Price or 2% on Diminishing Value for 2020/2021 year
- The loss continuity rules have been eased to allow companies in certain circumstances to carry forward losses when shareholding change breaches normal continuity rules. This is available where the business is basically continuing in the same or similar manner and is effective from the 2020/2021 year.
- Income equalisation deposits and refund time frames extended. This allows tax payers more time to pay any deposits and provides the ability to request refunds at an earlier date than normally allowed.
- Inland Revenue now have the ability to extend filing dates for returns and also to remit Use of money interest charges but taxpayers must met set criteria for these to apply.
- Inland Revenue have broadened the Research and Development expenditure refundability to allow business to access tax refunds earlier.
- Inland Revenue has removed the requirement on working 20 hours or more per week to be eligible for the in-work tax credit component for Working for Families Tax Credits (WFFTC).
- The winter energy payment to eligible persons has been doubled for the current year. Eligible persons will received $900 per person who live alone and $1,400 for couples or those with dependants.
The residency rules and overseas based student threshold have been relaxed for those people who have exceeded the time frames requirements due to lockdowns imposed by New Zealand or other countries.
Disclaimer: Please note this information is up to date in accordance with the posting date and time of this particular blog article. Any further updates released by the government and its associated ministries can be found on https://covid19.govt.nz .