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How The Government’s Coronavirus Relief Package Could Help You
We explain how the Government is supporting individuals and businesses.
Updated . What changed?
The announcement of the initial coronavirus Government relief package on 17 March 2020 and further updates have been welcomed by many Kiwis and businesses facing financial hardship due to COVID-19. While we can’t determine what effect COVID-19 is going to have on our country and our economy, the Government is being proactive to soften the potentially significant impact, which includes measures to support businesses, jobs, income support and tax proposals.
Here’s what the initial package included:
- $500 million for the health system
- $5.1 billion in wage subsidies for affected businesses
- $126 million in COVID-19 leave and self-isolation support
- A $2.8 billion income support package for our most vulnerable
- A $100 million redeployment package
- $2.8 billion in business tax changes
- A $600 million initial aviation support package
After the announcement that New Zealand would move to Alert Level 4 at midnight on 25 March 2020, updates to the original package were implemented. This update included an additional $4.2 billion for wage subsidies, removal of the cap for each business and wider eligibility. On 27 March 2020, applications for the previous leave payment for people in self-isolation were closed. The leave payment was rolled into the wage subsidy scheme.
On 15 April 2020, the Government announced further updates to the stimulus package with support for small and medium-sized businesses. On 1 May 2020, a few days after the country moved out of Alert Level 4 and into Alert Level 3, Finance Minister Grant Robertson outlined the Small Business Cashflow Loan Scheme. This scheme provides further assistance to businesses with 50 or less full-time staff.
Budget 2020 was released on 14 May, with a $15.9 billion jobs and business package. This package includes further funding for the wage subsidy scheme, free vocational courses for Kiwis who have lost their jobs, and a $400 million Tourism Recovery Fund.
After the reoccurrence of COVID-19 in the community, and the Auckland region’s return to Alert Level 3 on 17 August 2020, the Government announced a new financial package, The Resurgence Wage Subsidy.
How relief packages help businesses:
The coronavirus Government relief package was designed to reduce the blow for businesses and keep as many employees in work as possible, as the country deals with the impact of coronavirus. Here’s how the government is helping businesses navigate through this tough time.
If your business has at least a 30% decline in actual or predicted revenue due to Covid-19, you may be entitled to the wage subsidy. You must be doing all that you can to retain employees and need to pay employees a minimum of 80% of their usual income. If you meet the eligibility requirements, you can receive $350 for employees working 20 hours or less per week and $585.80 for those working more than 20 hours a week. The wage subsidy covers 12 weeks and is paid in a lump sum. There was previously a limit on how much each business could get, but this cap was lifted on 23 March 2020. Self-employed Kiwis and contractors are also eligible for the wage subsidy.
An extension to the wage subsidy scheme was announced in Budget 2020, with an additional $3.2 billion dedicated to supporting those businesses who have experienced a 50% drop in monthly revenue for a further 8 weeks.
As to be expected, guidelines have been put into place about who gets what and how. Making a false application with misleading information is considered fraud and will be dealt with accordingly.
The wage subsidy is managed through Work and Income. Employers, contractors and self-employed Kiwis can check the requirements and then fill in the application form online. As of 18 April, nearly $10 billion has been paid out to more than 85,000 businesses.
The Resurgence Wage Subsidy
Due to the return of COVID-19 in the community, a Resurgence Wage Subsidy payment was introduced on 17 August 2020. It is available for a 2-week period for businesses, “who have had, or expect to have, a revenue drop of at least 40% because of COVID-19 for a continuous 14 day period between 12 August to 10 September compared to a similar period last year,” (Work and Income, 2020). It is available nationally for both employers and the self-employed people, but please note, you cannot receive more than one payment for each employee. See the Work and Income website for full information.
Small Business Cashflow Loan Scheme
Viable businesses that employ up to 50 full-time staff may be eligible for the Small Business Cashflow Loan Scheme. This scheme provides loans from the Government of $10,000, with a further $1,800 for each full-time employee.
Loans are interest-free if paid back within one year. If the firm can’t repay the loan within 12 months, an interest rate of 3% is applied for a maximum of five years.
Applications for the loan scheme open on 12 May 2020 and the scheme is now open until 31 December 2020.
Business advice and consultancy
Work and Income is offering support and advice to businesses that are thinking about reducing staff hours or making people redundant. Rapid response teams have been set up around the country to discuss your situation and also assist employees with re-training, financial support and finding another job.
The measures announced on 15 April 2020 also includes $25 million for business consultancy support for the next 12 months.
Tax reform measures
To free up cash flow while experiencing a downturn in business, the IRD had five proposals from the initial business continuity package:
- The reinstatement of building depreciation
- A provisional tax threshold lift from $2,500 to $5,000
- Writing off interest on late payment of tax
- Removing the hours’ test from the In-Work Tax Credit
- Increasing the small asset depreciation threshold
Further tax proposals were announced on 15 April 2020 including:
- A temporary loss carry-back scheme worth $3.1 billion, applicable from 15 April 2020.
- Changes to the tax loss continuity rules to be applied to the 2020/21 tax year and later years.
- More flexibility for affected businesses with their tax obligations.
For the latest information and eligibility requirements, visit the IRD website.
Support for commercial tenants and landlords
With businesses finding it difficult to pay their rent and landlords struggling to meet mortgage repayments, new measures have been announced to support commercial property transactions.
The time for commercial landlords to cancel a lease has been extended from 10 working days to 30 working days. The timeframe for lenders with mortgaged land has been increased from 20 to 40 days, and from 10 to 20 days for mortgaged goods.
How the relief package helps individuals
It’s not only businesses that benefit from the relief package, as individuals affected by the impact of COVID-19 are also being looked out for.
- Thanks to the business continuity package and the wage subsidy, individuals may be able to keep their jobs that they would otherwise lose. Work and Income are providing advice and support to businesses to reduce the need for redundancies. Employees can check if their employer has received the wage subsidy by checking the COVID-19 Wage Subsidy Employer Search.
- Beneficiaries who receive the Jobseeker Support, Sole Parent Support, Supported Living Payment, Young Parent Payment or Youth Payment receive an extra $25 a week in their account.
- Those that receive the Winter Energy Payment will see their payment doubled for 2020.
- If you lose your job and are eligible for a benefit, the usual stand down period is waived so payments start the week after you receive approval.
There are also the following tax relief measures outlined by the IRD:
- Child support payments can be re-assessed if you are having trouble paying by the due dates.
- You may be able to receive increased or more frequent payments if you receive Working for Families Tax Credits and your income decreases.
- You can arrange to pay your outstanding tax in instalments or apply for a write-off in cases of serious financial hardship.
- You may be entitled to a certificate of exemption if you do contract work, with schedular-payment deductions.
- If you have a loss to carry forward, you may be moved to a reduced tax rate.
If you have concerns about any tax-related matters, visit the IRD website for more information.
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