Re: COVID- 19 – Support Packages for Businesses
On Tuesday the government announced a $5 billion package to support businesses that are affected by the Coronavirus outbreak. The main two packages for businesses are as follows:
- Wage Subsidy
The COVID-19 wage subsidy will be paid at a flat rate of $585.80 a week for employees working 20 hours or more per week, or $350 a week for employees working less than 20 hours per week. The subsidy is paid as a lump sum and covers 12 weeks per employee. The subsidy is for wages only and is to help keep your staff employed and to ensure the future viability of your business. Businesses can only get this subsidy once and the maximum that can be paid to an individual business is $150,000.
This subsidy has been put in place for employers or self-employed businesses that are affected by COVID-19 and face laying off staff or reducing hours because of a drop in income. The main qualification is that your business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year. This drop in income must be directly related to COVID-19. In order to achieve the subsidy your business must have taken active steps to mitigate the impact of Coronavirus and your business must make the best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
- Leave Payment
The second payment available to businesses is the leave payment. From 17 March the COVID-19 leave payment has been available to support businesses and employees if they:
- Need to self-isolate as determined by the Ministry of Health guidelines
- Cannot work because they are sick with COVID-19
- Cannot work because they are caring for dependents who are required to self-isolate or are sick with COVID-19
The COVID-19 leave payment will be available for 8 weeks. Employers will be able to apply for this more than once. It will be paid to employers who have eligible employees and they must pass the payment onto their employees in full. The COVID-19 leave payment covers full-time, part-time, casual employees and contractors. The COVID-19 leave payment will be paid at a flat rate of $585.80 to a person working 20 hours or more per week, or $350 to a person working less than 20 hours per week. Employers receiving the payment for those required to
self- isolate can receive it for 14 days. As people may be required to self-isolate more than once then employers will be able to apply for this on an as needed basis. It can be paid for the entire period that the employee is sick with COVID-19 but the employer must apply every 14 days.
Businesses and their employees can agree to use any form of paid leave (e.g. annual leave) to cover their period of self-isolation. However, employees are not required to have used all of their annual leave entitlements before they can receive this payment. The employee must have been legally working for their employer at the time of self-isolation and they must have been expected to work for the period of self-isolation. Self-employed people who are not earning at least the minimum wage are not entitled to the leave payment.
Applying for the Wage Subsidy and Leave Payment Subsidy
Applications should be done online at the website workandincome.govt.nz. Here is the link: https://workandincome.govt.nz/products/a-z-benefits/covid-19-support.html#null
The application is made online and you will need to supply the business IRD number, business name and address, as well as names and IRD numbers of your employees. Contact details for your business and your employees must be given. Work and income will check if you do indeed qualify for one of the subsidies and they will contact you by phone should they require further information regarding the application. Please note that you will require a New Zealand business number which is a 13-digit number. Limited Companies will have a 13-digit number. However, many sole traders, partnerships and Trusts will need to apply for a New Zealand business number. The Work & Income NZ website has a link to apply for this. The actual application form is relatively straight forward. It appears that no financial information is immediately required, however, WINZ will be contacting businesses, so it is important that you do have financial information or projections available to show that your income has been reduced by 30%.
- Tax Relief
In addition to the cash subsidy payments available, the government is also supporting businesses through areas of tax relief including a relaxation of the rules regarding use of money charges for late IRD payments. We always recommend, however, if you can’t make a payment to the Inland Revenue Department, that you contact them and make an arrangement to pay (prior to the due date). Continue to file all returns such as PAYE and GST even if you can’t immediately make payment to IRD. There are other tax changes including an increase in the provisional tax threshold to $5000 (was $2500) and assets used for business can be written off fully in the year purchased during the 2021 financial year.
Please contact one of our friendly team should you require any confirmation regarding the above. As always, we are here to help you through this difficult time.