How NZ’s COVID-19 stimulus can boost your cash flow and provide necessary relief

This information is current as of the publish date, however due to the evolving response to the crisis, please refer to the latest articles here.

Earlier this week the New Zealand Government announced it will spend $8.7 billion to reduce the blow for businesses as part of its $12.1 billion Coronavirus Economic Response Package. Here we take a look at some of the key measures and how we can help you receive assistance.

Wage subsidies

Wage subsidies account for the bulk of the business measures with the Government pledging $5.1bn to subsidise wages for 12 weeks.

To qualify, businesses will need to demonstrate a 30% drop in income in any month between January and June 2020 compared to the same month last year, and attribute this decline to COVID-19. In addition, employers will be required to sign a declaration stating that they have actively tried to mitigate the impact of COVID-19 on their business.

If a business is unable to show a drop in actual financial results, it will be able to use projected income based on cancellations for the remaining months of the financial year. Both existing and startup businesses are eligible for the assistance provided the business can provide evidence that it has sought advice from its bank or financial advisor. It must also continue to pay workers at least 80% of their regular income for the 12-week period.

Once qualified, employers will be paid $585.50 per week for full-time staff and $350 for part-time staff as a lump sum within five days. This is capped at $150,000.

How we can help

We recommend contacting us before signing the mandatory declaration to ensure you have the correct documentation and information in place.

We can assist in determining the impact on revenue and preparing the required documentation (such as cash flow projections) to support the wage subsidy application.

Leave payments

Only those employees who are in mandatory self-isolation or affected by COVID-19 and unable to work will be eligible for leave payments.

Employers will be required to apply for leave payments on behalf of the employee, and all payments received by the employer will need to be paid directly to the employee.

How we can help

We can assist businesses to apply for leave payments on behalf of their employees.

Tax breaks

A Bill is to be introduced to cover all announced tax measures. For more information on those measures, please see our first article in response to the stimulus: New Zealand pledges $8.7bn for business assistance. The new tax rules will come into effect for the 2020/2021 tax year.

For businesses on a December balance date, these tax rules will already be effective and will immediately benefit from the tax relief measures.

For businesses on a 31 March balance date, the rules will be effective from 1 April 2020.

Asset depreciation

Effective from the 2020/2021 financial year, depreciation of commercial and industrial buildings will be reinstated and is not a temporary measure.

How we can help

Our specialist tax advisors can revise your 2020/2021 provisional tax obligations by incorporating the impact of the depreciation to be claimed on industrial and commercial buildings.

Instant asset write-off

The Government is increasing the threshold of write-offs for low-value assets from $500 in the current tax year to $5,000 for the 2020/2021 tax year. This will then be reduced permanently to $1,000 for the 2021/2022 tax year onwards.

For those with a standard balance date (ie 31 March), we recommend acquiring assets of up to $5,000 after 1 April 2020 (if possible).

How we can help

Our specialist tax advisors can assist by calculating your provisional tax obligations, factoring in any qualifying asset write-offs.

Provisional tax threshold

The provisional tax threshold for the 2020/2021 financial year will increase from $2,500 to $5,000. This will be a permanent increase.

If the residual tax liability is less than $5,000 for the 2020/2021 tax year onwards, then a business won’t need to pay any provisional tax for the following year. Payment of the 2020/2021 residual tax can be deferred until 7 February 2022 (or 7 April 2022 for clients on our tax agency list). This means essential costs can be prioritised over the provisional tax payments for the 2020/2021 financial

How we can help

We can assist you with your provisional tax planning to factor in these threshold increases.

Proposal to write-off use-of-money interest

Discretion will be given to Inland Revenue to waive the use-of-money interest on late payments of taxes that are due on or after 14 Feb 2020 (they will have this discretion for 2 years unless Inland Revenue decides to extend it beyond the 2 years).

How we can help

We can assist you with making the application to Inland Revenue to remit the use-of-money interest, including any late payment penalties that may be imposed.

We understand that the foreseeable future will prove difficult for many businesses to manage their financial affairs.

At William Buck, we can work with you to look at the options available for cutting non-essential costs and providing advice on budgeting and cash flow projections to help plan for financial impacts over the next 12 months.

Businesses may also experience impacts on their supply chains. We can assist in looking at options through our colleagues in the Praxity network to see how to get continuous supply from other jurisdictions.

Should you wish to discuss the above matters with one of our William Buck business or tax advisors, please get in touch with our Auckland office on 09 366 5000 or our Tauranga office on 07 927 1234.