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Wellbeing Budget 2020 Rebuilding Together

 

Government delivers 2020 Budget 'Rebuilding Together'

In the lead up to the Budget, the Prime Minister commented ' New Zealand is about to enter a very tough winter'.

This year's budget is all about jobs and the government is expected to borrow heavily to deliver it. The forecast surplus of $1.3b had turned into a deficit of $2.7b.

What's in the budget?

Wage subsidy extended but targeted - $3.2 billion dollars to support a targeted extension of the Wage Subsidy scheme. From June 1 businesses that suffered a 50% drop in revenue over a 30 day period will be able to apply for a further eight week period. (The initial 12 week scheme was available for businesses that could show a 30% revenue reduction).

Research and Development - $150 million short-term temporary loan scheme to incentivise businesses to continue R&D programmes. The loans will provide one-off finance and will be administered by Callaghan Innovation.

Trade - $216 million boost to New Zealand Trade and Enterprise to expand the scope and intensity of support provided to exporting firms.

Ecommerce support for small businesses - $10 million in funding to support small businesses to improve their e-commerce service offerings, and incentives/grants to encourage ecommerce adoption.

Infrastructure and housing - $3 billion more for infrastructure, including building 8000 state and social houses over the next 4 to 5 years.

Training - $1.6 billion in a Trades and Apprentices Package including financial support for businesses to retain their apprentices, free apprenticeships and training in targeted critical industries. There is a specific $50 million fund for Maori Apprentices and Trades Training.

Environment jobs - 1.1 billion to create 11,000 green jobs including regional environmental projects, biosecurity and pest control roles, and DOC's 'job for nature' fund.

$400 million Tourism Recovery Fund – including a transition programme to support businesses to plan for the next steps, a fund to ensure key tourism assets survive and a domestic tourism campaign.

For full details you can access Finance Minister Grant Robertson's Speech here.

COVID-19 An Important Message

COVID 19 – CORONAVIRUS

AN IMPORTANT MESSAGE

 

We are concerned that a number of businesses are at risk given the spread at which the crisis has developed and continues to affect our everyday lives.  There are many articles around about the effect of the coronavirus from a health perspective and we do not wish to repeat these, nor are we experts in health issues.   Countries are in lockdown; governments are reacting to the situation and various financial help is being offered worldwide.  People are unable to gather, sporting events are cancelled, some businesses have already gone under and fear is driving panic buying.   If you are a business owner, now is the time to show your true leadership and the first step is Don't Panic!

The next step must be to sit down in a quiet spot away from any disturbance and think about how the pandemic is affecting your business.  Try to understand how it could or is affecting your business, your staff, your suppliers, your customers, both directly and indirectly. Our philosophy in helping and advising clients is based around three steps:

 

Planning, measuring performance and growing profits.

 

Step One – Planning

Every plan should be written down and we suggest these plans cover 3 scenarios.  Firstly, what if the coronavirus only has a small impact on your business – say up to a 15% cut in turnover. Secondly, what if the effect is medium – say affects turnover by 25-40%.  Thirdly, what if the effect on your business is high – say affecting turnover by 50-60%.  Your plans should include the effects and solution for each level.  Where are we now, where do we want to be and what are the strategies to achieve that.

 

There are a number of areas the plans should cover.  These include:

 

1.         People Plan

a.       What are the essential parts of the business that must keep operating for your customers?

b.       Can the team work from home?  What do we need to action if this is to happen?

c.       Can we keep staff isolated?  Do we have a virus containment policy?

d.       What plans can we put in place to reduce staffing numbers if required? – split shifts, sick pay, annual leave entitlements.

e.       What are our meeting policies with our teams, suppliers and customers?

f.        Can we cover essential functions of the business if key employees become sick?

g.       Ensure your staff are well aware of your plans and what is happening daily.

 

2.         Financial Plan

a.       What is our cash position?  Do we have sufficient reserves to cover 2-3 months operating costs?

b.       Do we have sufficient cash to cover loan and finance payments, tax payments etc?

c.       What stocks do we have on hand?  What are supply chain lead times in replenishment?  How many weeks of stock on hand do we have?

d.       Are our suppliers affected?  Can we order more stock if required?

e.       Be in constant contact with your customers.  Check orders on hand. Check their future expectations.

f.        Calculate break even points for each of the three scenarios.

g.       Know how much down time you can cope with and when to take action.

h.       Can you negotiate with large creditors to preserve cash?

 

 3.       Leadership

a.       Remain calm and in control.

b.       Be firm.

c.       Don't panic.

d.       Roll out information to staff and clients regularly.

e.       Update policies and procedures as required.

f.        Stay up to date with the facts.

g.       Continue looking ahead, the next day, the next week, the next month.

 

Step Two – Measuring Performance

It is now vital to keep your financial information up to date and know your exact financial position at any time.  Quality data means quality decisions.  Compare actual results to the plan regularly.  Do we have KPI's or OKR's and are they providing lending information about our financial performance?  Act according to the results being achieved.  Analyse the results.  Can we put in place strategies and actions to improve our performance?  Measuring free cashflow is vital and knowing the effects of working capital issues on our cash reserves is important.

 

Step Three – Growing Profit

Right now, don't give up on any marketing plans.  Every downturn creates an opportunity.  Spend time analysing any opportunities to improve your business.  Look at your costs?  Analyse and implement improvements using the 7 lean wastes every business has.  Now is the time to improve your business model if possible.  Be agile and adapt to the changing business conditions.  This virus and recession will pass, the unknown is when.  What can we do to improve margins and increase customers?  When trading conditions improve, will we be in a position to take advantage of them?


SUMMARY

The important message is sitting back and doing nothing is not an option in these trying times.  Those that do will have a greater chance of their business not surviving the pandemic.  Remember the 3 P's – Planning, Measuring Performance and Growing Profits.  We are here to help at any stage, so don't hesitate to contact us.  We are available by telephone, email and video chat as well as in person should you need help on any of the above.  Things are changing daily and rapidly, so don't leave it too late to take action. 

 

All the best from the Team at

McGregor Bailey

Business Continuity Package - COVID-19

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

Five new ways to pay instead of using cheques

Pay your taxes by cheque?
Five new ways to do it.

If you normally write a cheque to pay for your taxes, it's time to decide how you will pay in the future. As of 1 March 2020, the IRD will no longer be accepting cheques. By the end of the last financial year (June 2019), only around 5% of payments received by IRD were by cheque, so they made the call to phase them out. 

 

Here are five faster, cheaper and safer ways to pay your taxes:

  • Pay securely by direct debit using a debit card or credit card through myIR. Login and register at www.ird.govt.nz
  • Make payments using online banking - contact your bank to find out how
  • Use credit or debit cards to make online payments at ird.govt.nz/pay
  • Visit Westpac and pay your taxes in person by EFTPOS or cash
  • If you're overseas, pay using a money transfer service. Search "make a payment" at ird.govt.nz 

 

No more cheques for IRD

No more cheques for IRD

IRD will not be accepting cheques from 1 March 2020. If you prefer to use cheques, start preparing to change the way you pay your tax. 

If online banking worries you because of the risk of a hacker stealing your money, you could have a special bank account and put your tax money in it only when you are ready to pay it.

Inland Revenue has advised us the payment options will be:
myIR: Direct debit and card payments can be made from myIR.
Online banking: One-off or scheduled recurring payments can be made using online banking.
Money transfer: Your clients based overseas can pay us using a money transfer service. Search for "Make a payment" on our website for more information.
Credit or debit card via our website: Payments can be made by credit or debit card through our secure payment website. Go to our website and search for "Make a payment" and select "Pay using credit or debit card".
Westpac: EFTPOS or cash payments can be made at any Westpac branch or Smart ATM.

If you need some help, call us.

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