FINANCIAL SUPPORT FOR BUSINESSES
COVID-19 FINANCIAL RELIEF & SUPPORT SUMMARY
A summary of the COVID19 financial relief and support available as compiled by the team at VCFO Group Limited (current up to 3pm Friday 27th March 2020).
The government has created a central resource for COVID-19 business information with updates about COVID-19 and guidance to help businesses.
1. IN PLACE
$585.80 per week ($350 for part-timers with less than 20 hours work per week) for 12 weeks where the employer has suffered a 30% reduction in revenue compared to prior periods; projections can be used; no maximum subsidy applies and only one application per employee per employer. If you have not previously applied for the subsidy in respect of a particular employee a new application may be made.
The employer declaration made on application requires the employer to use best endeavours to continue employing the relevant employees with at least 80% of salary paid. Paid in a lump sum, any employer may apply. Contractors and self-employed are also able to claim this support – as a minimum, you must have an IRD number before you can apply.
$585.80 per week ($350 for part-timers with less than 20 hours work per week) for up to 8 weeks for employees self-isolating. Payment flows in full (i.e. $585.80 or $350 as appropriate) to the employee via the payroll system via the employer.
Contractors and self-employed are also able to claim this support. Paid in two weekly lump sums, within 5 working days, repeat applications available.
(* From 3 pm on 27 March 2020, the COVID-19 Leave Payment is no longer available for employers. Applications already submitted will continue to be processed and paid. The Leave Payment remains available for those in essential work who require sick leave due to COVID-19.)
Increase of $25 to all main benefits plus a doubling of the winter energy payment; assistance with urgent costs where you have lost your job (food, accommodation costs (rent, mortgage, board), power, gas and water bills or heating, medical and dental costs, bedding).
Immediate freeze on rent increases; no tenancies termination during the lock-down period, (unless the parties agree, or in limited circumstances); tenants who had previously given notice can stay if they need to stay in the tenancy during the lock-down period; tenants will still be able to terminate their tenancy as normal, if they wish.
Announced 2 April 2020: The Government has launched a Business Finance Guarantee Scheme for small and medium-sized businesses, 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, as a response to difficulties caused by COVID-19.
Under the scheme, businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to 3 years. The scheme will offer a total of $6.25 billion in loans to New Zealand businesses. The Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%.
For information on the criteria and how to apply visit business.govt.nz website.
6 months no repayments, (interest still accrues, likely extension to repayment period). Applications are to the mortgagee bank.
The government has prepared an FAQ page regarding the Business Finance and Mortgage Holiday schemes here. To view the information specific to your bank, click on the relevant link below:
2. CONTRACTUAL RELIEF
BUSINESS PREMISES RENT
Check your contracts generally for any relief that may be available for emergency situations similar to the COVID-19 crisis. In particular the current standard lease provided by the Auckland District Law Society (introduced in 2012) includes a rent abatement where access is restricted due to an emergency (the previous standard lease agreement version did not include this clause).
3. STILL TO COME
Announced 3 April 2020: The Government will be introducing legislation to make changes to the Companies Act to help businesses facing insolvency due to COVID-19 to remain viable, with the aim of keeping New Zealanders in jobs.
The changes will include:
giving directors of companies facing significant liquidity problems because of COVID-19 a ‘safe harbour’ from insolvency duties under the Companies Act
enabling businesses affected by COVID-19 to place existing debts into hibernation until they are able to start trading normally again
allowing the use of electronic signatures where necessary due to COVID-19 restrictions
giving the Registrar of Companies the power to temporarily extend deadlines imposed on companies, incorporated societies, charitable trusts and other entities under legislation
giving temporary relief for entities that are unable to comply with requirements in their constitutions or rules because of COVID-19
For more information about the measures and how they will work visit the companies office website.
We anticipate further guidance for commercial landlords and tenants in the coming days.
The Ministry of Business, Innovation and Employment is considering a number of relief measures and we expect to see a number of measures as the COVID-19 situation progresses. These should be detailed on the government’s COVID-19 webpages and you should continue to monitor these for helpful information.
4. TAX RELIEFS - LEGISLATION IN PLACE
Provisional tax relief
The provisional taxpayer threshold rises from $2,500 to $5,000 and allow more taxpayers to defer tax payments; applying to the 2021 income year.
Reductions in profits should be considered before any provisional tax payments are made e.g. for most taxpayers, the last instalment for 2020 provisional tax due by 7 May 2019 and/or the first instalment of 2021 provisional tax due by 28 August 2020. The IRD website has information and a calculator to assist. Tax pooling financing options can help delay cash payments. Please call your accountant or VCFO (details below) to discuss if you’re unsure.
Late tax payment interest waiver
Interest on late tax payments that occur due to COVID-19 effects can be waived by the Commissioner; this is a helpful change given interest is automatically applied in every other case and is rarely remitted. A late Valentines, this applies to payments due after 14 February 2020 e.g. 2019 terminal tax payments due by 7 April 2020.
The Government has reintroduced tax depreciation allowances on commercial buildings at the old rate of 2% diminishing value (DV) per annum. This will apply to both new and existing buildings. It’s a little unclear from the factsheet as to whether this will be effective for the 2021 (conceptual analysis and expected) or 2022 (example given) income year, but it’s a permanent and welcome return for this old favourite (after it was denied back in 2011).
Low value assets write-off
The low value asset threshold (allowing for immediate write-off deduction rather than depreciation over time) will rise from $500 to $5,000 per asset for a year (purchases between 17 March 2020 and 16 March 2021) before dropping down to $1,000 per asset on a permanent basis.
If you need assistance with your tax position, or if you have questions about the financial support available, please contact your usual accountant. Otherwise, contact Andy Archer, Phil Gore or Claire Dilks at VCFO on 09 918 3474 or via the VCFO website.