It’s not often the government provide cash support for small businesses, so if you have been impacted by the economic impact of COVID-19, we are strongly encouraging our clients to apply for the Covid-19 funding support and government subsidies available to them.
Disclaimer: As the current situation develops, information in this article may become dated, please contact us to discuss your situation and what might be the best course of action.
The Wage Subsidy Scheme
This is available to businesses who have had a 30% decrease in sales, or anticipate this downturn, when compared to the same month last year.
You may not have seen a decrease in turnover yet, but you could be anticipating the decrease due to:
- Travel restrictions
- Cancellation of events
- Delays with contracts
- Customers being in self-isolation
- Consumers hesitation to spend at this time
We are offering support with this process free of charge to our clients, if you need help to determine if you are eligible or if your business has had a 30% downturn, please contact us.
Ideally you will complete the actual application yourself, as it is very easy form but we would encourage you to act on this quickly to avoid disappointment. Some of our clients have already received payment.
You can check out the application forms:
You will need:
- Your IRD number
- Your business name
- Business address
- Bank Account number
- NZBN Number
- Employee names
- Employee IRD numbers
- Employee date of birth
- Employment Type (more or less than 20 hours)
Businesses operating for less than a year
Where a business has been operating for less than a year, they must compare their revenue against a previous month that gives the best estimation of the revenue decline related to COVID-19. Again, please contact us if you need help with this.
Sole Trader/Partnership with employees
You will need to apply for an NZBN to apply for the wage subsidy for your employees. This application is an automatic process so this shouldn’t delay your application by much. You can apply for your NZBN here
It’s our recommendation to act quickly to help your cashflow in these uncertain times.
Tax treatment of these payments
IRD have clarified the treatment of these payments for GST and Income Tax purposes:
- The wage subsidy or leave payment scheme will not be subject to GST. It will be treated as exempt.
- The wage subsidy paid to employers is not taxable. It is excluded income under Section CX 47 of the Income Tax Act.
- Likewise, no deduction is available when the employer pays it as wages to employees.
- It is however, taxable to the employee as it is considered part of their normal wages and is subject to PAYE, Student Loan, KiwiSaver deductions etc.
- The leave payment for self-isolation paid to employees or self-employed persons is subject to tax as it is paid to replace taxable income.
Here’s some more answers to common questions from Work and Income here.
The Business Loan Scheme (Business finance guarantee scheme)
The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the COVID-19 crisis.
This scheme leverages the Crown’s financial strength, allowing banks to lend to ease the financial stress on solvent firms affected by the COVID-19 pandemic. The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates.
The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks. The government has stressed that the banks have absolute discretion as to who is eligible to receive these loans, but that this is applicable only for solvent businesses.
We recommend to talk with your bank as soon as practical, even if you are not sure that you will need to draw down the cash as contingency in the event of a situation that it becomes necessary or urgent for your business.
Regional Business Partner Network Voucher Scheme – Covid-19 Support
The Regional Business Partner (RBP) Network provides support to small and medium-sized enterprises throughout New Zealand. As part of the nation’s COVID-19 response, there are additional resources available through the network to help your business and they are all fully funded.
Kiwitax are offering two courses for eligible businesses through the RBPN, the first is a practical cashflow management training programme, tailored for your business here. The second is a growth planning training course to help keep you business moving forward through Covid-19, here.