What a strange and difficult time we are all living through. We hope you and all your family are safe and well.
There have been several tax changes and initiatives to help New Zealand business owners, which we have detailed below.
Also, the Government has launched a new helpline to provide all NZ businesses with advice and to connect them with additional support:
- specific advice and access to Government-funded business support
- advice on what Alert Level 3 means for your business
- general business advice and access to online resources and webinars
- connections to business advisory services.
COVID-19 Small Business Cash Flow Loan (SBCS)
Organisations and small to medium businesses, 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 Small Business Cashflow (Loan) Scheme (SBCS) has been introduced to support businesses and organisations struggling because of loss of actual or predicted revenue as a result of COVID-19. They must have 50 or fewer full-time-equivalent employees.
Inland Revenue will administer the payments and repayments of this scheme. Applications will be open from 12 May 2020 to 12 June 2020 inclusive.
Eligible businesses and organisations are entitled to a one-off loan. The maximum amount loaned is $10,000 plus $1,800 per full-time-equivalent employee.
Loans will be subject to an annual interest rate of 3% from the date it is provided by us.
If you repay the loan in full within 1 year you won’t be charged any interest. If you do not repay the loan in full within one year, you will be charged interest for the entire term of the loan.
Repayments are not compulsory in the first 24 months. Voluntary payments can still be made over this period. After 24 months, you will be required to make regular payments for both the principal and interest.
Business Finance Guarantee Scheme
Government has launched a business finance guarantee scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.
Under the scheme, businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years.
Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%. A normal lending process will be followed by the banks, which will make the lending decisions. Further details can be found on the banks’ websites.
The Government has allocated additional funding to the Regional Business Partner Network to support New Zealand businesses and service providers during the COVID-19 pandemic.
The Covid-19 Business Advisory Funding will provide support in areas such as HR, health and wellbeing, business continuity, cashflow and finance management, strategy and digital capability.
Check it out at https://covid19.nzte.govt.nz/page/regional-business-partner-network/#how
Employers, including sole traders and self-employed, may be eligible for a wage subsidy paid by the MSD if they have been affected by COVID-19 and had a 30% actual or predicted revenue decline.
The COVID-19 Wage Subsidy will be paid at a flat rate of:
$585.80 for people working 20 hours or more per week (full-time rate)
$350.00 for people working less than 20 hours per week (part-time rate).
The subsidy is paid as a lump sum and covers 12 weeks per employee. It needs to be paid to employees through their normal PAYE wages.
GST – There is no GST on the wages subsidy.
Income Tax – For self-employed, you will need to pay income tax on this as it replaces your lost earnings. For employers, you don’t need to pay income tax and you can’t claim the wages you pay using the subsidy.
Working for Families
In-Work tax credit, you no longer need to work at least 20 hours for a sole parent or 30 hours for couples to be eligible for the in-work tax credit. This means that working families who have a reduction in working hours as a result of COVID-19 do not lose their eligibility for the IWTC.
Working for Families Tax Credits entitlements are based on your yearly family income. So If your family income has decreased, you may be entitled to increased payments or an increased frequency of your payments. Log into you My IR and update your Family Details.
Depreciation on Commercial Buildings
Depreciation on Commercial buildings has been reintroduced from 1 April 2020 at 2% diminishing value. This does not include Air BnB type properties.
Increased Provisional Tax Threshold
Increase in provisional tax threshold from Residual income tax of $2,500 to $5,000 for 20/21 year.
This will mean you may no longer have to pay provisional tax in three amounts during the year, but just pay terminal tax if your residual income tax is under $5,000.
Low Value Assets
Threshold increases from $500 to $5,000 from 17 March 2020 – 16 March 2021. Then decreases to $1,000 from 17 March 2021. So, any fixed assets under $5,000 you bought after 17 March 2020 can be written off completely.
Use of Money Interest Remission
Inland Revenue can remit interest on late payment if the customers ability to make payment was significantly adversely affected by the COVID-19 outbreak, for payments due on or after 14 February.
To be eligible for remittance of penalties and UOMI, customers must meet the following criteria:
- They have tax that is due on or after 14 February 2020
- Their ability to pay by the due date, either physically or financially, has been significantly affected by COVID-19
- They will be expected to contact the Commissioner as soon as practicable to request relief and will also be required to pay the outstanding tax as soon as practicable
Inland Revenue considers the term “as soon as practicable” means that so long as the taxpayer applies for the relief at the earliest opportunity and agrees to an arrangement that will see the outstanding tax paid at the earliest opportunity, or will be paid over the most reasonable period given the taxpayer’s specific circumstances, the test will be met. Even if you will be unable to pay the tax on time it is important to file the tax returns on time.
IRD Policy Changes to be enacted
Greater flexibility for taxpayers in respect of statutory tax deadlines – Inland Revenue will be given greater flexibility to modify timeframes or procedural requirements for taxpayers who are impacted by COVID-19.
- Changes to the tax loss continuity rules – Moving from a continuity of ownership test of 51% to a ‘same or similar business’ test, this enables investors to buy into a company without it losing its’ losses
- Measures to support commercial tenants and landlords – extending the timeframes required before landlords can cancel leases from 10 working days to 30 working days and extend the timeframe mortgagees can exercise their rights to sale or repossession.
- Further business consultancy support – available through Canterbury Chamber of Commerce,
- A tax loss carry-back scheme
Tax Loss Carry Back Scheme
A loss carry-back scheme has been included in a bill introduced the week of the 27th April 2020. It should enable a business to offset a loss in a particular tax year against a profit in a previous year and receive a refund of the tax paid in the previous year.
This should provide cash to firms that are, or anticipate, being in loss. We will know more once the legislation is passed this week.
Staff working from home – Tax Free Reimbursements
IRD have made a determination that between 17 March to 17 September 2020, you can pay staff $5 per week for phone costs and $15 per week for other expenses with no evidence required. This will be deductible to the business and not taxable for the staff member.
Winter Energy Payment
The Winter Energy Payment has been doubled for the 2020 year.
For eligible people it will be $900 for single people with no dependent children and $1,400 for couples and people with dependent children.
Tax Return Filing and Payments
If your business is unable to pay its taxes on time due to the impact of COVD 19, contact IRD and they will look to remit any penalties and interest.
But even if you can’t pay, you need to keep filing your tax returns.
Please let us know if we can help in any way.