Tuesday 17th of March, the New Zealand Government announced a Business Continuity Package to assist businesses struggling due to the impact of the COVID-19 outbreak.
The $12.1 billion package includes:
· Initial $500 million boost for health
· $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today
· $126 million in COVID-19 leave and self-isolation support
· $2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020
· $100 million redeployment package
· $2.8 billion in business tax changes to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax
· $600 million initial aviation support package
The business cashflow and tax relief measures that have been announced include:
1. Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by the COVID-19 outbreak.
Under the current proposal, the Inland Revenue may agree to write-off UOMI at our discretion, if they consider a business or individual has had their ability to pay tax on time significantly constrained by COVID-19. This proposal would cover all payment to the Inland Revenue where UOMI is charged, whether they're taxes (such as income tax or GST), or other payments (such as Working for Families) on or after 14 February 2020.
Under the current proposal, you will not have to be in a particular region or industry to get this relief. Once legislation has passed the Inland Revenue will be creating guidance on this proposal.
2. Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/2021.
Currently, taxpayers with a residual income tax of NZ$2,500 or more are required to pay provisional tax throughout the year. This threshold will be increased to NZ$5,000 from the 2020/21 tax year, meaning that less businesses will need to front the cash to meet their provisional tax obligations.
3. Increasing the small asset depreciation threshold from $500 to $5,000 for the 2020/21 tax year as a temporary measure. From the 2021/22 income year, the existing NZ$500 threshold for an immediate write-off will be increased to NZ$1,000 on a permanent basis.
The temporary increase (to $5,000) is designed to incentivise taxpayers to bring forward investments to encourage spending. This will reduce compliance costs for businesses and encourage businesses to continue investing.
4. Allowing depreciation on commercial and industrial buildings from 2020/2021.
Depreciation deductions at 2% diminishing value will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels. This will help support businesses with cashflow in the near-term and assist with the broader economic recovery by stimulating business investment in new and existing buildings.
Building owners will be able to adjust provisional tax payments immediately in anticipation of the additional deductions that will become available.
The above changes will be contained in a tax bill to be introduced soon.
Twelve-week wage subsidy scheme
Wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to sole traders and the self-employed as well as firms.
· Amount of support: $585.80 per week for a full-time employee (20 hrs or more) or $350.00 per week for a part time employee (less than 20 hrs). The payment will be made as a lump sum for a period covering 12 weeks. The maximum amount any one employer can receive is $150,000.
· Employers must have suffered or are projected to suffer at least a 30% decline in revenue compared to last year for any month between January 2020 and the end of the scheme in June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.
· Some of the key undertakings required by the employer are:
Employers will need to declare that, on their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period. This is the equivalent of keeping people working 4 out of 5 days of the week.
Employers must also have taken active steps to mitigate the impact of COVID-19 (e.g. engaged with their bank/financial advisor) and sign a declaration form to that effect.
Employers can apply from today. Applications can be made through an online portal on the Work and Income website www.workandincome.govt.nz. MSD will aim to make first payments no later than five working days from when applications are received. Applications can be made from today (17 March) for the next 12 weeks.
Eight-week scheme for workers, contractors and self-employed taking COVID-19 leave
The COVID-19 leave payment scheme runs for the next eight weeks, providing financial support to businesses that have workers unable to work because they are in self-isolation, are sick with COVID-19, or caring for others with COVID-19. The scheme applies to employees, contractors and the self-employed.
· The payments will be $585.80 per week for full time and $350 per week for part time workers.
· The payment does not affect any paid leave entitlements that are 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 during the period of self-isolation and who can be paid normally by their employer.
· Employers apply for the leave on behalf of any employee who is self-isolating or sick. Payments can be backdated to 17 March 2020. MSD pays employers, who will then be required to pass it on to affected employees. MSD will pay on a fortnightly basis once it receives an application.
· Other key parameters of the scheme are:
Eligibility is open to all employees legally working in New Zealand (through their employers), the self-employed and contractors.
Eligibility will only be for workers who are not able to work from home.
The entitlement is for:
– those who self-isolate in accordance with public health guidance and who register with Healthline
– those who are ill with COVID-19, and
– those who cannot work because they are caring for a dependent in either of these circumstances.
Those who leave New Zealand to travel overseas from 16 March 2020 will not be eligible for this payment for self-isolation on their return.
Workers taking sick leave before 17 March 2020 can only access the scheme for time spent on sick leave from 17 March 2020. It will not be accessible for those who have travelled overseas since 16 March 2020.
Contact your McGregor Bailey advisor should you require any assistance or have any questions.
Further information on the Business Continuity Package can be found at: Treasury COVI-19 Business Continuity Package