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

  • All businesses that have reduced hours or stood employees down due to the impacts of COVID-19 may apply to receive payments to pass onto their employees.
  • The payments are available for 12 weeks and are $585.50 per week for full-time workers and $350 per week for part-time workers.
  • Businesses less than a year-old and high growth firms are also eligible. They must demonstrate a revenue loss of 30% against a similar time period.
  • Self-employed people with variable monthly incomes are eligible if they can demonstrate the revenue loss assessment against the previous year’s monthly average.
  • The scheme covers registered charities, non-governmental organisations, incorporated societies and post-settlement government entities.
  • There is now a search function available to find employers who have received payments under the Scheme, which you can access here: https://services.workandincome.govt.nz/eps

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

  • 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 50% for the 30 days before the employer applies for the extension, compared to the closest period last year.

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

  • 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 4 weeks per employee. The 4 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.
  • Under the scheme, businesses with annual revenue up to $250,000 and $80 million can apply to their banks for loans up to $500,000 for up to three years.

To find out more, please visit business.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.

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