Following this week’s Government announcement, wage subsidies will now be available for all employers that are significantly impacted by COVID-19.
This applies to all New Zealand employers, contractors, sole traders, self-employed people, registered charities and incorporated societies.
There is no maximum amount of assistance a business can now receive. The Government has removed the $150,000 per business cap on wage subsidies that can be paid to employers affected by COVID-19. However, the maximum that employers will receive per employee is $7,029.60 for a full-time employee and $4,200 for a part-time employee, covering the 12-week period.
New businesses (e.g. that are less than one year old) and high growth firms (e.g. firms that have had significant increases in revenue) will be eligible. They will need to demonstrate the revenue loss assessment against a similar period, for example comparing March 2020 to January 2020.
If you have already applied for and been granted the wage subsidy for your employees and the Ministry of Social Development has capped the amount paid, you don’t need to do anything because the Ministry will top up the difference.
If you have applied for the wage subsidy for your staff, and claimed only enough to meet the cap, once you have used this subsidy you can reapply.
Finance Minister Grant Robertson also announced an agreement between the Government, the Reserve Bank, and New Zealand’s retail banks to put in place a mortgage holiday scheme that will be offered by retail banks.
Mortgage holders and small and medium enterprise customers whose incomes have been affected by the COVID-19 pandemic can apply for a six-month payment holiday on both the principal and interest of their mortgages.
Business Finance Guarantee Scheme
The Government and the banks will implement a $6.25 billion Business Finance Guarantee Scheme for small and medium enterprise customers, to protect jobs and support the economy through this challenging period.
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.
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.
The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks’ Core Funding Ratios from 75 percent to 50 percent, further helping banks to make credit available.
Should you wish to discuss the above matters, please contact one of our William Buck business Advisors which you can find on our website here.