FAQs on COVID-19 Government economic response measures

Our team has reviewed the recently announced support packages and answered the questions our clients are asking.

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In response to the escalating Coronavirus pandemic and its implications on business, the Government has announced support packages to boost cash flow, business investment, and secure labour.

  • From the 2020-2021 income year onwards, businesses can claim depreciation deductions for commercial and industrial buildings.
  • Airbnb properties with less than four individual units or are part of a residential home, are NOT non-residential and therefore cannot be depreciated.

To find out more, please visit ird.govt.nz

  • Taxpayers will be able to deduct the full cost of more low-value assets in the year purchased.
  • The threshold will be increased from $500 to $5,000 for the 2021-21 income year.
  • From 17 March 2021, the depreciation threshold will be permanently increased to $1,000.

To find out more, please visit ird.govt.nz

  • The threshold for paying provisional tax will increase from $2,500 to $5,000. This is a permanent change that will take effect from the 2020-2021 income year.
  • This will give businesses until 7 February following the year they file to pay their tax, rather than paying in instalments throughout the year.

To find out more, please visit ird.govt.nz

  • Taxpayers who have had their ability to pay their tax on time significantly adversely affected by the COVID-19 outbreak may be eligible to have their interest waived on late tax payments.

To find out more, please visit ird.govt.nz

  • Employers and sole traders could apply for the Wage Subsidy before 10 June 2020. It was to support them if they were impacted by COVID-19 and faced laying off staff or reducing hours.
  • You can no longer apply for the Wage Subsidy. However, you can still apply for the Leave Support Scheme if you have staff who can’t work because of COVID-19

To find out more, please visit workandincome.govt.nz

  • A Wage Subsidy Extension payment will be available to support employers who are still significantly impacted by COVID-19 after the Wage Subsidy ends on 9 June 2020.
  • The Wage Subsidy Extension will be available from 10 June 2020 until 1 September 2020.
  • Eligible employers will need to reapply through Work and Income once their current 12-week subsidy has come to an end.
  • For the Wage Subsidy Extension, an employer must have experienced a revenue loss of at least 40% for 30 continuous days. This needs to be in the 40 days before the employer applies for the extension, compared to the closest period last year.
  • A Wage Subsidy Extension payment was available from 10 June to 1 September 2020 to support employers, including self-employed people, who were still significantly impacted by COVID-19.
  • You can no longer apply for the Wage Subsidy Extension. However, you can still apply for the Leave Support Scheme if you have staff who can’t work because of COVID-19.

For more information on eligibility criteria and how the scheme will operate, please read our Wage Subsidy Extension Scheme FAQ here.

To find out more, please visit workandincome.govt.nz

  • The Resurgence Wage Subsidy was a 2 week payment, available between 21 August and 3 September 2020 for employers who weren’t already getting a wage subsidy.
  • You can no longer apply for the Resurgence Wage Subsidy. However, you can still apply for the Leave Support Scheme if you have staff who can’t work because of COVID-19.

To find out more, please visit Work and Income.

  • The COVID-19 Leave Support Scheme (previously COVID-19 Essential Workers Leave Support) is available for all employers, including sole traders, who meet the criteria. It covers workers who are at higher risk if they get COVID-19 and unable to work from home or need to self-isolate.
  • The weekly rates are $585.80 for full-time workers and $350 for part-time workers. This will be paid as a lump sum and covers 2 weeks per employee. The 2 weeks of payment starts from the date the application was made.
  • Leave Support and Wage Subsidy payments cannot be claimed for the same employee at the same time.

To find out more, please visit workandincome.govt.nz.

  • Businesses can apply to their banks for loans under the Business Finance Guarantee Scheme.
  • A term loan or revolving credit facility may be available if a company, sole trader, partnership or trust needs credit for cashflow, capital assets and projects related to, responding to or recovering from the impacts of COVID-19.
  • Banks can lend to businesses with an annual revenue of up to $200m, while loans are available from non-bank lenders for businesses with annual revenue up to $50m. There is a lending limit of $5m, or $3m from a non-bank.

To find out more, please visit treasury.govt.nz

  • New Zealand’s retail banks are offering to defer repayments for all residential mortgages for up to six months for customers financially affected by COVID-19.
  • If eligible, you will not need to make principal or interest payments for up to six months.
  • Interest will still increase, and deferred interest will be added to the principal amount of the loan.
  • Small to medium business owners, including sole traders and the self-employed, may be eligible for a one-off loan with a term of 5 years if they have been adversely affected by COVID-19.
  • The eligibility criteria are the same as the Wage Subsidy Scheme. How much you can borrow is based on the wage subsidy you received, or the wage subsidy you would have received if you had applied for it.
  • IRD will lend up to $100,000 to businesses that employ 50 or less full time staff. The maximum amount loaned is $10,000 plus $1,800 per full-time-equivalent employee.
  • 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.
  • Inland Revenue will administer the payments and repayments of this scheme. Businesses will apply for the loan payment through IRD’s myIR.
Business size Base loan FTE equivalent amount Total loan
Sole trader $10,000 $1,800 $11,800
10 FTE $10,000 $18,000 $28,000
50 FTE $10,000 $90,000 $100,000

To find out more, please visit ird.govt.nz

  • Businesses expecting to make a loss in either the 2019/2020 year or the 2020/2021 tax year can estimate that loss and carry the loss back one year.
  • A refund will be received for the tax paid in the previous profitable year.

To find out more, please visit ird.govt.nz

  • Taxpayers are will be able to seek new shareholdings/investment in a similar industry/business without losing their tax losses under the continuity rules.
  • For example, a new investor wishes to buy 75% of the shares in an existing company and bring in new capital to continue the current business of selling widgets – prior year losses will be retained under the new rules (whereas previously they would be lost) making it a more commercially viable proposition.
  • The Government intends passing legislation before the end of March 2021, and for it to apply to the 2020/21 and later income years.

To find out more, please visit ird.govt.nz

  • Refundability of the R&D tax credit has been brought forward to the 2019/20 tax year.
  • Bringing the application date of the year 2 refundability rules forward to year 1 (2019/2020) should provide more businesses with access to R&D tax credit refunds sooner.

To find out more, please visit ird.govt.nz

  • Companies and other business entities affected by the pandemic will be able to place existing debts into hibernation for up to 7 months.
  • A business may enter into Business Debt Hibernation if, as at 31 December 2019, it was able to pay its debts and, if at least 80 per cent of the directors (or equivalent) agree that it may do so.
  • Approval requires a majority in number and value of creditors voting in favour of the proposed arrangement.
  • While a business is in Business Debt Hibernation it is able to continue trading, subject to any restrictions agreed with creditors as a condition of entering into it.

To find out more, please visit companiesoffice.govt.nz.

  • Businesses may be able to apply for a loan of up to $400,000 to support planned R&D activity, subject to other forms of government R&D support.
  • The loan will be interest free if it is paid back in full within the first year, otherwise 3% interest will be charged from the start of the loan.
  • Repayments are not required for the first three years, however businesses may repay sooner if they wish. The maximum loan period is 10 years.

To find out more, please visit callaghaninnovation.govt.nz

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