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COVID-19 - Small Business Cashflow Scheme

The Government has introduced the Small Business Cashflow (loan) Scheme (SBCS) to support businesses and organisations struggling because of loss of revenue as a result of COVID-19.

Overview

  • To be eligible for the SCBS loan a business or organisation must have 50 or fewer full-time-equivalent employees and be eligible for the Wage Subsidy Scheme. They must also have a sound plan to be viable and ongoing and hold information on file to verify this.
  • Applications will be open from 12 May 2020 up to and including 12 June 2020.
  • Most will receive funds within five working days.
  • IRD will administer the payments and repayments of this scheme. Businesses should speak with their financial advisors before taking this loan.
  • The loan has a five-year term and must be repaid by 31 July 2025.
  • The annual interest rate will be 3% beginning from the date of the loan being provided. Interest will not be charged if the loan is fully paid back within one year. Repayments are not compulsory in the first 24 months.
  • In most cases, businesses will be entitled to a loan amount of $10,000 plus $1,800 per full-time-equivalent employee, to a maximum of $100,000.

Details about eligibility criteria and applying for the loan can be found at:  https://www.ird.govt.nz/covid-19/business-and-organisations/small-business-cash-flow-loan

COVID-19 - Wage Subsidy

The introduction and subsequent further changes to the wage subsidy provided by the Government has bought up a lot of questions for many, including the correct tax treatment of these. We list below some links that you may find helpful, as well as some information forwarded to us by the Inland Revenue. 

Common Questions - WINZ

Your Questions Answered - IRD

The IRD has also given the below advice to tax agents:

Inland Revenue would strongly encourage employers to pass the wage subsidy amount (which is for a 12-week period) to the employee as per their normal pay cycle.

For example: If the employee is normally paid weekly, the intention of the wage subsidy scheme is that the employee receives 1/12th of the wage subsidy lump sum each week for 12 weeks as part of their weekly pay, in addition to any potential top up from the employer each week.

Some employers may choose to share the wage subsidy as a 12-week lump sum straight away to their employees. This has significant potential to have downstream tax and social policy implications for an employee.

What are the tax consequences for employees?

• Paying the 12-week subsidy to an employee as a lump sum brings up to 12 weeks of income, that would normally be earned in the next tax year, into this tax year (which ends on 31 March 2020).

• The additional income could move them into a higher marginal tax bracket and result in them receiving a tax bill when Inland Revenue completes the automatic assessment process later this year;

• If, as a result of receiving the additional income, their total gross income for the year exceeds $48,000 they will no longer qualify for the Independent Earner Tax Credit;

• It may also impact their Working for Families Tax Credits, Child Support, Paid Parental Leave entitlements or they may receive a Student Loan bill

 As this is an evolving situation, the above information is subject to change. 

COVID-19 - Economic Response Package

On Tuesday 17 March 2020, the NZ Government announced a Business Continuity Package to help those struggling with the economic impact of the COVID-19 coronavirus pandemic.  Finance Minister Grant Robertson called the NZ$12 billion package "the most significant peace-time economic plan in modern New Zealand history". He noted the following key plans to the policy:

  • business cashflow and tax relief measures (both permanent and temporary)
  • a 12-week wage subsidy scheme
  • an 8-week cash top-up scheme for workers, contractors and the self-employed taking leave for COVID-19 reasons, and
  • income support measures (both permanent and temporary) for beneficiaries and superannuitants.

Tax relief measures

Tax measures announced by the Government to alleviate business cashflow concerns are as follows:

Re-introducing depreciation for buildings
Depreciation deductions at 2% diminishing value will be re-introduced for commercial and industrial buildings from the 2021/22 income year. The depreciation deductions will be available to all sectors and will apply to both new and existing buildings on a permanent basis. Building owners will be able to adjust provisional tax payments immediately in anticipation of the additional deductions that will become available.

Increasing the low-value asset write-off threshold
An immediate tax write-off will be available for more low-value assets to encourage spending. This incentive is being delivered in two stages. As a temporary measure, assets costing up to NZ$5,000 will be eligible for an immediate write-off for the 2020/21 income year. 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.

Increasing the provisional tax threshold from NZ$2,500 to NZ$5,000
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.

Use-of-money interest write-off for struggling taxpayers
Businesses and individuals who are adversely affected by COVID-19 and who can demonstrate the inability to pay tax by the due date may be eligible for a use-of-money interest write-off. The relief will apply to all tax payments including provisional tax, PAYE and GST due on or after 14 February 2020. Currently, this measure will last for two years, unless extended by the Government. Details on objective tests to be applied will be released by Inland Revenue in the coming days.

The above changes will be contained in a tax bill to be introduced soon. More information can be found at https://www.ird.govt.nz/covid19

Further measures were announced on 15 April 2020, including:

a tax loss carry-back scheme that enables businesses to offset a loss in a particular tax year against a profit in a previous year, resulting in a refund of the tax paid in the previous profitable year

loosening of the tax loss continuity rules so that (from the 2020/21 year) if there is a change in ownership, losses will not necessarily be lost if the "same or similar business" is continued, and

greater flexibility for taxpayers in respect of statutory tax deadlines, including deadlines for filing tax returns and paying provisional and terminal tax.


Twelve-week wage subsidy scheme

From today (and for the next 12 weeks), 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. The subsidy is:

  • NZ$585.80 per week for a full-time employee (20 hours or more), or
  • NZ$350.00 per week for a part-time employee (less than 20 hours).

The payment is made as a lump sum for a period covering 12 weeks. The maximum amount any one employer can receive is NZ$150,000.

Employers must have suffered, or be projected to suffer, at least a 30% decline in revenue compared to last year for any month between January 2020 and June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.

Key undertakings required from the employer are:

  • On their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income (eg 4 out of 5 days of the week) for the duration of the subsidy period.
  • Employers must also have taken active steps to mitigate the impact of COVID-19 (eg engaged with their bank/financial advisor) and signed a declaration form to that effect.

Applications for the subsidy can be made through the Work and Income website www.workandincome.govt.nz. The Ministry of Social Development (MSD) will aim to make first payments no later than five working days from when applications are received.

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 are:

• NZ$585.80 per week for full-time workers (more than 20 hours per week), and

• NZ$350 per week for part-time workers (20 hours a week or less).

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.

Income support measures for beneficiaries and superannuitants

Two permanent changes have been made to welfare payments:

  • Main benefits will rise by NZ$25 per week. These changes will come into effect on 1 April 2020 and are permanent.
  • From 1 July 2020, working families with children who are not receiving a main benefit and have some level of employment income each week will no longer have to satisfy the hours test to receive the In-Work Tax Credit (which was previously set at a minimum of 20 hours a week for sole parents and 30 hours a week for couples with children).

In addition, the Winter Energy Payment paid to superannuitants and beneficiaries will double in 2020. This temporary measure begins on 1 May 2020 and will be NZ$40.91 per week (single people) and NZ$63.64 per week (couples or people with dependents).

The lastest updates on all the above information can be found here

TMNZ

In addition, TMNZ had earlier released that they would have a discounted interest rate for those in the forestry and tourism industries. They have also confirmed that they will extend this to the fishing industry.  
If this affects you, then please get in touch to discuss. 

 

Get your year end right and save tax!

With not long until year-end, we encourage you to spend a few minutes this week reading our top tips to sort your end of year paperwork.

  • First make sure you have all the documents we'll need, such as PAYE statements, bank statements showing interest earned, dividend statements for shares, and receipts for expenses. It can be tricky to keep track of everything so if you're not already, go digital. Scanning receipts and saving electronic invoices in the cloud saves time and space. Xero offers a great service to enable you to do this, and remember, even if you are on a great accounting system such as Xero, we do still need that additional information!
  • Look at writing off old debts – if you don't think that a bill is going to be paid, then write these off before year end.
  • Review your inventory. The value of your stock affects your business's taxable profit. Do a meticulous stocktake before year-end. Get rid of any out-of-date or damaged items so they can be written them off. See our helpful fact sheet on stocktakes. 
  • Check out your assets – year-end is the time to ditch surplus assets. If you can sell them, great, otherwise write them off. And if you're planning to buy any new equipment or assets, do it on or before 31 March (rather than 1 April) to reduce your taxable income and gain a full month's depreciation.
  • Talk to us on any planned dividend payments, as managing imputation credits will be important.
  •  And lastly, if you were considering a move to Xero, then the start of the new financial year is the most ideal time to do this. Give us a call and we can provide expert advice on how to convert, as well as provide the most tailored Xero subscription to your needs.

The Companies Office is now recording more information to be shared with the NZBN Register. As technology moves forward, providing this additional information will make it faster and easier for you to work with other businesses and the government. 

The information collected includes your GST number, your contact details, including phone numbers and email address and trading details such as where the company trade, and it's main business activities. This information will then be made made publicly available on the Companies Register and the New Zealand Business Number (NZBN) Register, which can be seen by other businesses, government and the public.

If you would like this information to be included on the Companies and NZBN Register, let us know, and we can update this for you.  

For more information about this, please see the Companies Register page. 

Changes to ACC for the Self-Employed

For those of you who are self-employed and not on ACC CoverPlus Extra, there has been a change to the way that ACC invoices you.

In the past, your ACC levy was based on your previous years earnings, however going forward, this will now be based on your actual earnings, charged once we have filed your income tax return.

What this means for you is that most of you who are self employed will not receive an ACC Levy invoice in the 2019/2020 year. Instead, you will receive your next ACC invoice in the2020/2021 year once your tax return has been filed.

For more information, please see the ACC website

Note that if you are on ACC CoverPlus Extra, you should have already received your invoice. Please make sure that this is paid by the due date as ACC has a very strict cancellation policy around CoverPlus Extra.

Air BnB - What are the tax implications?

There has been a rise in popularity recently of using Air BnB (or similar) to rent out a spare room or a holiday home to earn some extra money.

Unfortunately, some people don't think of the tax implications that this could cause. It's important to be aware that any income that you receive (less any costs associated) will need to be included in your tax returns and have income tax paid on this amount. If it is a holiday home that is being rented out then the mixed use asset rules will apply, apportioning deductible and non deductible expenses based on days rented and days used personally.

Another consideration is GST consequences. Because the rental received is short-term, this can potentially be subject to GST. The threshold to register for GST is $60,000, and whilst your Air BnB income may not take you over this you need to consider any other income that you already earn. Also, if you are already GST registered, then you will need to account for GST on your short term rental income as well.

If you are considering, or have been renting out a space, then don't hesitate to contact us to discuss your tax requirements. And don't forget about any other implications of renting out your own space, such as insurance. Your insurance company will want to know if there are tenants in the property, and will recommend specialised insurance for this.  

ACC Refunding Historic Business Levies

ACC released on Thursday that two historic overpayment issues have been uncovered, relating to self-employed customers and businesses who paid levies when they were not required to do so.

The press release detailed that the issues revolve around:

  • First-year levies collected since 2002 from self-employed customers, who worked fulltime (ie averaged over 30 hours per week across the financial year). This affects approximately 106,000 customers.
  • There are also around 200,000 businesses who paid provisional invoices over the same period, in situations where they were not required to do so.

To read more, the press release is linked here.

The refunds will begin in October 2018, and are expected to take till April 2019 to complete. Of course it is expected that some customers will have changed their details and not updated this with ACC.

To check if you are due a refund, and to update your details if you are, please click here.

If you've seen the film The Wolf of Wall Street, you'll be familiar with the concept of money laundering – an illegal process where 'dirty money' received from criminal activities is passed through legitimate businesses and made 'clean.'

In response to a growing number of laundering incidents in New Zealand, the government has made changes to the law, which now affect accountants and small businesses like yours. As of 1 October 2018, we're required to put new preventative measures in place to help tackle money laundering and financing of terrorism.

What does this mean for you?

We are going to be asking you for more information in order to confirm your identity as part of our customer due diligence process. While this will only apply to new clients from 1 October 2018, it's likely that we will also need to ask this of our current clients in the near future.

We might also need to ask you for more information about your business than what we have in the past, especially if it involves large cash transactions ($10,000 or more in one transaction or international "wire transfers" of $1,000 or more).

For more information, please follow the link for the Justice Department's commentary

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