Updated 17 April 2020
We have summarised below the help available to ensure your business survives the impact of Covid-19. We can help with tax advice, financial planning & forecasting, refinancing, new borrowings, reducing costs, help with working with your bank and IRD and help with the wage subsidy package.
We would advise you to carry out a health check on your business. Review your stock requirements, your debtor control, overhead costs, etc.
We also advise you to contact the following:
Insurance broker - claim for losses
Banker - obtain a short term overdraft, an interest & principal holiday, change existing loans, obtain further loans, discuss any loan covenants.
Landlord - to agree on a rental holiday or a reduction in rent payments
Supply Chain - look for new ways to supply your business
Business Finance Guarantee Scheme:
Businesses with annual turnover between $250,000 and $80 million can apply (up to 30 September 2020) to their banks for loans up to $500,000 for up to 3 years. The loan is partly supported by government if you fail to repay the loan. Normal lending process will be followed and further details can be found on the banks' website.
Mortgage Holiday Scheme:
A six month principal and interest payment holiday for mortgage holders and small sized businesses whose incomes have been affected by Covid-19.
Support for Employers:
Wage Subsidy - From 17 March 2020 a wage subsidy is payable to employers for up to 12 weeks (per business) if they have suffered a 30 percent decline in revenue compared to last year for any month between January and June 2020. The rate is $585.80 for full time employees and $350.00 for part timers.
Essential Workers Leave Support - Available for essential businesses to pay their employees who can’t go to work because of Ministry of Health Guidelines recommend they say at home and the employee cant' work from home. Applications are for four weeks at a time at the same rate as the wage subsidy.
Leave and isolation support - Support for employees that are in self isolation or cannot work because they have Covid-19 or cannot work as they are caring for people who have to self-isolate or who have Covid-19. This is payable for up to eight weeks at the same rates as the wage subsidy but it is not available for those who can work from home. NOTE: from 27 March 2020 this support is no longer available
Tax Issues - The subsidy is not subject to GST and is a non taxable government grant. However the subsidy is taxable in the hands of the employee (or the self employed) and the payment to an employee is not tax deductible to the employer. For self employed the lump sum can be spread over the compensation period and will not be subject to ACC levies.
Tax changes that may help your business:
Loss Carry Back - The ability to carry actual or estimated losses back to the previous year. The loss carry back rules may mean you will receive prior year tax paid refunded. This may be a permanent change from the 2022 year.
IRD can cancel use of money interest on a late tax payment if the taxpayer’s ability to make a payment due on or after 14 February 2020 was significantly adversely affected by the COVID-19 outbreak. You must contact IRD and advise and enter into a repayment plan as soon as practicable. There is also scope to write off core debt.
Low Value Asset Write Offs - Increasing the ability to expense low value asset purchases from $500 to $5,000 for assets purchased from 17 March 2020, reducing to $1,000 from 17 March 2021 onwards.
The provisional tax threshold will increase from 1 April 2020 from $2,500 to $5,000.
Depreciation on Commercial Buildings - Reinstatement of depreciation deductions from 1 April 2020 for commercial and industrial buildings at a rate of 2% diminishing value. This does not include residential buildings and simple short term rentals.
Bringing forward broader R&D refund ability
Changes to the carry forward of losses rules - Normally losses are lost if there is a shareholder change of more than 51%. The introduction of a "same or similar business test" allows businesses to change ownership and keep their losses.