Updated 25 March 2020
As a result of the impacts of Covid-19 the Government has made available extra spending for businesses, beneficiaries, pensioners and the health system.
Here is an overview on what it all means.
How the support will be split:
- $9.3 billion in wage subsidies for affected businesses in all sectors and regions, available from 15th March. Businesses need to show a 30 percent decline in revenue for any month between January and June 2020 and applications can be made here.
- $2.8 billion in business tax changes to free up cash flow
- $126 million in COVID-19 leave and self-isolation support
- $2.8 billion income support package for our most vulnerable
- $500 million boost for health
- $100 million redeployment package
- $600 million initial aviation support package
- $6.25 billion Business Finance Guarantee Scheme for SMB’s.
Wage subsidy for employers for up to 12 weeks (per business) if they have suffered a 30 per cent decline in revenue compared to last year. This comprises $585 a week for full-timers and $350 a week for part-timers, available to all employers and the self-employed.
Leave and isolation support:
Leave and self-isolation support for eight weeks for people with Covid-19 either those caring for people with it or for those in self-isolation. This will be for up to eight weeks at the same rates as the wage subsidy but it is not available for those who can work from home.
Self-isolation payments will not be available to people who leave NZ after 16 March 2020 and return.
- The provisional tax threshold will lift from 1 April 2020 from $2,500 to $5,000 allowing an estimated 95,000 businesses to defer tax payments and possible waiving of interest on late payments.
- The package also allows the Commissioner of Inland Revenue to cancel use of money interest on underpayments of tax for taxpayers unable to pay tax on time due to the outbreak.
- Increasing the allowance to expense low value asset purchases from $500 to $5,000 for assets purchased in the 12 months from 17 March 2020, reducing to $1,000 from 17 March 2021.
- Reinstatement of depreciation deductions for commercial and industrial buildings at a rate of 2% diminishing value. This will apply from 1 April 2020 and will cost an estimated $2.1 billion up to 2024.
- Bringing forward broader R&D refundability. The proposed amendment would bring planned refundability measures forward by one year, to the 2019–20 income year. This would help relieve cashflow problems, encourage businesses to retain their R&D staff, and (where possible) support these firms to continue their R&D in the current environment.
- Allowing use of money interest to be waived. The Bill proposes to allow Inland Revenue to cancel interest on a late tax payment if the taxpayer’s ability to make a payment due on or after 14 February 2020 was significantly adversely affected by the COVID-19 outbreak.
- Allowing Inland Revenue to share information with government departments to help these agencies provide assistance in relation to the outbreak.
- Allowing more access to the in-work tax credit. This would ensure that working families whose working hours are reduced as a result of COVID-19 would not lose their eligibility for the tax credit. Around 19,000 families will benefit.
The package is designed to help business but there is still a strong possibility that businesses will have to reduce staff numbers to survive.
For businesses, the main areas relate to the wage subsidy where a business will have to be able to demonstrate a reduction of sales by 30%. If sales drop by less than 30% then the business will not be eligible for the subsidy. There also may be the possibility of receiving a subsidy for payment of wages for self-isolation.
Apart from the subsidies, businesses will also be able to claim depreciation on buildings which they couldn’t before. This should include fit-out costs that otherwise could not be depreciated.
Mortgage payment holiday:
Individuals & business owners whose income have been affected by the Covid-19 economic disruption can apply for a 6 month mortgage principal & interest payment holiday. The specific details of this initiative are being finalised and agreed urgently – banks will make these public in the coming days.
Business finance guarantee scheme:
The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the COVID-19 crisis.
This scheme leverages the Crown’s financial strength, allowing banks to lend to ease the financial stress on solvent firms affected by the COVID-19 pandemic.
The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates.
The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.