The Government’s package has wage subsidies at its core and is aimed at keeping people in paid employment, providing financial assistance to those who need to stay at home, providing tax cuts and boosting benefits.
The package has three components:
The Package in a Nutshell
We provide further detail regarding the proposals impacting businesses below.
COVID-19 Wage Subsidies and Leave Payments
Who Is Eligible
An employer, contractor, sole trader or self-employed person can qualify for the COVID-19 wage subsidy provided you can satisfy the following:
How Much You Will Get and How to Apply
The COVID-19 wage subsidy will be paid at a flat rate of $585.80 for full-time staff and $350 per week for part-time staff. The subsidy is paid as a lump sum and covers 12 weeks per employee. It is to be used to pay wages only and to assist you in keeping your staff employed, while you consider changes that may be needed while disruption continues and to ensure the future viability of your business. The maximum subsidy payable is $150,000 and it can be claimed only once.
Employers will not be asked for verification before the subsidy is approved, however the MSD will have the ability to check applications and verify information at a later date. All employers are required to sign a declaration that they meet the eligibility criteria at the time of applying.
Applications can be made online at https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null
The Government has announced that payments will start in five working days.
The Government considers that self-isolation is an important way to slow the spread of COVID-19, accordingly a leave payment package has been announced.
From 17 March 2020, the COVID-19 leave package is available to support people that are required to self-isolate, cannot work because they are sick with COVID-19, or cannot work because they are caring for dependents who are required to self-isolate or who are sick with the virus.
Leave payments will be available for eight weeks from 17 March 2020, employers will be able to apply for this more than once and the payment must be passed to their employees in full.
Who Is Eligible
An employer, contractor, sole trader or self-employed person is eligible to apply. It is available to full-time, part-time, casual employees and contractors who are legally working in New Zealand and who:
How Much You Will Get and How to Apply
The leave payment will be paid at a flat rate of $585.80 per week for full-time employees, and $350 per week to part-time employees, for the period that the person is absent. The payment is available for the entire period of sickness, but the employer must reapply every 14 days.
You can agree with your employees to use any form of paid leave, such as annual, to cover the period of self-isolation. However, employees are not required to have used any or all of the paid leave entitlements before they can receive this payment.
If you are self-employed, then you need to be able to show that you were earning the minimum wage when you decide to self-isolate, that you were expecting to work during the period of self-isolation and that you now cannot draw an income for that period. If you are self-employed and you don’t earn at least the minimum wage, or you are not legally working in New Zealand then you will not be entitled to the payment.
State sector employees are not eligible to receive the payment, as it is expected that state sector employers will pay normal wages through periods of self-isolation. However, it has been confirmed that employees of the following organisations will be able to access the leave payment:
Similar to the wage subsidy, indications can be made online at: https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null and the Government is aiming to start making payments five working days after they have all the information required.
In addition to the wage subsidies and leave payments, the Government has announced a number of tax changes designed to assist businesses struggling due to the effects of COVID-19. These include:
Reinstatement of Depreciation on Commercial Buildings
With effect from the 2021 income year (so from 1 April 2020 for businesses with March balance dates), depreciation deductions (at 2% diminishing value) will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels. This will enable businesses to start reducing their provisional tax payments for the current income year immediately and is estimated cost $2.1 billion over the next three years. This is a surprising, but welcome move from the Government.
Immediate Deductions for Low Value Assets
The low value asset write-off threshold has been increased to $5,000 for the 2021 income year but will be reduced to $1,000 in the 2022 income year going forward. This means that businesses can immediately deduct the cost of acquiring assets with a cost of $5000 or less. This is a move that is squarely aimed at encouraging businesses to invest and to encourage spending, it is expected to cost $667 million over the next three years.
Increase in the Provisional Tax Threshold
The provisional tax threshold will be increased from $2,500 to $5,000 from the 2021 income year, meaning that fewer individuals and businesses will be required to pay their tax in equal instalments throughout the year. This means that small businesses can delay paying their taxes until next year. This is a permanent change.
Discretion to Write-Off Use of Money Interest (UOMI) Where Affected by COVID-19
The IRD will be given the power to waive interest on late tax payments who have been significantly impacted by the COVID-19 outbreak. This will apply to all payments, including provisional tax, PAYE and GST due on or after 14 February 2020. The Commissioner will have this discretion for a period of two years.
Removing the Hours Test from the in Work Tax Credit from 1 July 2020
Currently there is a requirement to work at least 30 hours combined for couples, or 20 hours for single parents, to be eligible for the work tax credit as part of the working for families regime. However, this requirement will be removed from 1 July 2020.
The Government’s changes are significant and wide ranging. This is a welcome move from the Government in their attempt to soften the sharp economic impact that the outbreak of COVID-19 is likely to have.
For clients that are impacted by the economic effects of the COVID-19 outbreak, we encourage you to get in contact with us as soon as possible. The team at Nexia NZ are committed to assisting you and your business get through the upcoming challenges.
March 17, 2020