Coronavirus COVID-19 New Zealand government rescue package
Dear Valued Clients,
With Finance Minister Grant Robertson warning that coronavirus COVID-19's economic consequences may exceed those of the last global financial crisis, the New Zealand government has announced a NZD12.1 billion package to cushion the pandemic's economic impact.
This email focusses on the new wage subsidy, leave payment and tax implications of the package that is aimed towards supporting business owners:
Wage subsidy
Businesses that can show they have had a 30% decline in revenue for any month between January and June 2020 compared to the year before can claim wage subsidies. Applications can also be made on the basis of forecast revenue loss within that period.
Employers who claim the subsidy will be paid NZD585.50 per week for full-time staff and NZD350 per week for part-time staff. The pay-out will be a one-off lump sum, covering a period of 12 weeks. This means NZD7,029.60 for a full-time employee and NZD4,200 for a part time employee. The maximum amount any one employer can receive is NZD150,000.
Business owners should be aware that in order to be able to receive this assistance they will need to undertake:
-To continue, to the best of their endeavours, employing the affected employees at a minimum of 80% of their income for the duration of the 12-week subsidy period; and
- To take active steps to mitigate the impact of coronavirus COVID-19, and sign a declaration to that effect, such as engaging with their bank and financial advisor.
Affected employers can make applications to the Ministry of Social Development (MSD) from 17 March 2020 until 9 June 2020. Further details and application forms can be found here.
These measures and the undertakings required of those businesses claiming the subsidy reflect the government's priorities of promoting business confidence and staff retention over the next few months.
Leave payment
A new leave payment has been made available to support people and businesses where there is a need to self-isolate, or where a person cannot return to work due to their own coronavirus COVID-19 diagnosis or the diagnosis of a dependent.
The leave payment will be paid out at a flat rate of NZD585.80 per week, for people working 20 or more hours per week, and NZD350 for those working less than 20 hours per week. It will be paid to employers who have eligible employees in self-isolation (as well as to eligible self-employed workers) and must be passed on to the employee in full. Employees are not required to have used paid leave entitlements before they can receive the leave payment.
Where the person is self-isolating, the payment can be received for 14 days, with applications for further payments to be made on an "as-needed" basis where a person must self-isolate more than once.
Where the payment is for someone unwell or looking after a dependent, then the payment can be received for the entire period of their illness, but the employer will need to reapply every 14 days.
The leave payment will be available for eight weeks from 17 March 2020. Applications must be made to MSD. Further details and application forms can be found here.
The government will also be providing immediate benefit increases, income support and an increase to the winter energy payment for beneficiaries and those on low incomes.
Tax
Four new tax measures have been announced to support businesses affected by coronavirus COVID-19:
1. Depreciation on commercial and industrial buildings.
Depreciation deductions are reintroduced for new and existing industrial and commercial buildings, including hotels and motels. This law change will allow owners of commercial and industrial buildings to start claiming depreciation deductions at a 2% rate on a diminishing value basis. Though the commencement date for this change is somewhat unclear, we understand this change is intended to apply for the 2020/21 income year.
2. Immediate deductions for low value assets.
Increasing the allowance for immediately deductible low-value assets in the year of purchase. The threshold for low-value immediately deductible assets will increase from NZD500 to NZD5,000 for the 2020/21 income year, and will be permanently increased to NZD1,000 for future income years. The Inland Revenue says that this should reduce tax compliance costs and encourage business to continue to invest.
3. Fewer small businesses having to pay provisional tax.
The Government has increased the threshold at which provisional tax is payable from NZD2,500 to NZD5,000. This will benefit some smaller taxpayers and, for example, delay the due date for tax payments for 2020/21 income year until the terminal tax due date to 7 February 2022.
4. Writing off interest on late payments of tax for certain taxpayers.
The Inland Revenue will be given the power to waive interest on late paid tax (including GST and PAYE) for those who have been significantly adversely affected by coronavirus COVID-19. A taxpayer will have to show an inability to pay tax by the due date as a result of being significantly adversely impacted by coronavirus COVID-19. Further details on the objective tests will be finalised in the coming days.
It does not appear that the proposed tax changes will go as far, or have the immediate cash impact for most businesses, as was suggested by the finance minister in his speech. Further tax changes could have been made to support SMEs or businesses in a tax loss position.
If you require any assistance with this please feel free to touch base with the team at FoxPlan Accounting & Wealth management.
The views and opinions expressed in this article are not intended to be a personalised service for an individual retail client. The views and opinions are general in nature, may not be relevant to an individual's circumstances, and constitute class service only. Before making any investment, insurance or other financial decisions, you should consult a professional financial adviser of FoxPlan Limited. You can find more important information about us here.