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.
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.