COVID-19: What government support is available for businesses?
About the Author:
Robyn Walker
National Technical Director and Tax Specialist at Deloitte New Zealand
Robin is responsible for making sure Deloitte is up to date with all tax developments, preparing submissions and developing thought leadership in the area of tax.
On 28 February 2021, Auckland moved to COVID-19 Alert Level 3 for at least seven days, while the rest of New Zealand has returned to COVID-19 Alert Level 2. These changes in Alert Levels can result in significant economic effects and it’s important for businesses to understand what government support is available.
In this article we explain what assistance is currently available and what assistance will become available to support businesses.
What is available at COVID-19 Alert Level 3 or 4
In the event Alert Levels escalate to Level 3 or higher for a period of seven days or more, there will be a new wage subsidy scheme put in place. Many of the terms and conditions are likely to be similar to those applied under the former schemes implemented in 2020, but there will be a difference to the length of the scheme and the frequency of payments. In particular:
A wage subsidy will be put in place if the COVID-19 Alert Level is raised to 3 or 4 for seven days or more, in any part of New Zealand. As the Government has indicated that Auckland will be in Alert Level 3 for a minimum of seven days from 28 February 2021, the wage subsidy will be activated.
Support will be provided in two-weekly payments, for the duration of the COVID-19 Alert Level escalation, rounded to the nearest fortnight (e.g. if Level 3 were in place for 22 days, there would be a payment for two fortnights). This contrasts to the lump sum approach taken with the original Wage Subsidy (12 weeks) and the Wage Subsidy Extension (eight weeks).
Like previous schemes, the payment rate remains at $585.80 and $350 per week per full-time and part-time employee respectively.
Businesses will need to see a 40% reduction in revenue as compared to the typical fortnightly revenue during the six-week period immediately preceding the change in COVID-19 Alert Level (i.e. 17 January to 27 February 2021). It is expected this can be based on a forecast revenue loss (provided it then materialises).
Businesses will be required to provide evidence of the decline in revenue being due to the change in Alert Level (e.g. it was not an expected normal decline in revenue as a result of seasonally higher sales during the holiday period). Businesses outside of Auckland will also be able to apply.
Other requirements are expected to remain the same, in particular there will be a requirement to retain staff and pass on the subsidy amounts.
The wage subsidy will be administered by the Ministry of Social Development. Our expectation is that applications for the wage subsidy will open within the next week.
What is available at COVID-19 Alert Level 2
A “Resurgence Support Payment” is available when New Zealand, or any region/s within the country, moves to COVID-19 Alert Level 2 (or higher) for seven days or more. As Auckland was at COVID-19 Alert Level 2 from Sunday 14 February through to Monday 22 February 2021, the seven-day threshold has already been exceeded once. The increase in Alert Levels from Sunday 28 February 2021 will also last seven days or more, so this will trigger a second Resurgence Support Payment.
This payment will be available to businesses which see a 30% or greater reduction in revenue as a consequence of the change in Alert Level.The Minister of Finance, Hon Grant Robertson has noted that “[t]his payment recognises that some businesses face one-off costs or impacts to cashflow when we step up an Alert Level to follow public health advice. The payment is structured to provide most support to smaller firms who are most likely to face cashflow issues but will be available to all businesses and sole traders.”
To determine whether this criterion is met, businesses will need to show a 30% reduction over a seven-day period following the change in COVID-19 Alert Level, as compared with typical revenue earned in the six weeks immediately before the change in levels. The Resurgence Support Payment will be available to all businesses (including sole traders) that have been operating for six months or more.
The value of the payment will depend on the size of the organisation; businesses will receive a payment of $1,500, plus an additional $400 per employee, up to a total of 50 FTEs. This means the maximum payment available will be $21,500. It is worth noting that this grant is subject to GST therefore GST registered businesses will need to return 3/23rds of the payment to Inland Revenue. However, input tax credits can then be claimed when the Resurgence Support Payment is spent.
The Resurgence Support Payment is administered by Inland Revenue and at this stage applications can be made in relation to the 14 – 22 February 2021 increased Alert Levels until 22 March 2021. Applications should open on Sunday 7 March in respect of the most recent Alert Level increase.Recipients of the Resurgence Support Payment should expect to have their name listed on a public register like what has occurred with previous wage subsidies.
What is available at all COVID-19 Alert Levels
Businesses are able to utilise the Leave Support Scheme when employees who cannot work from home are required to self-isolate due to potential exposure to COVID-19, or they are considered “higher risk” if they contract COVID-19 when there is active community transmission. The Leave Support Scheme provides a fortnightly payment of $1,171.60 or $700 respectively for a full-time or part-time employee who is isolating.
In mid-February 2021 the Leave Support Scheme was supplemented by the Short-Term Absence Payment (STAP). This payment of $350 per eligible employee is available to support employees who are required to stay at home while they await the results of a COVID-19 test but are unable to work from home. The payment also applies to parents or caregivers who have dependents awaiting a test result, as well as self-employed workers.The STAP will be of most assistance for those employees who have used their sick leave entitlements. Employers can apply for the STAP once in any thirty-day period per eligible worker (unless a health official or medical practitioner advises or requires the worker to re-test during that period). If the employee subsequently tests positive, they will be eligible for the Leave Support Scheme.
Businesses with 50 or fewer employees can be eligible to apply for a Small Business Cashflow Loan. This scheme, administered by Inland Revenue, allows certain businesses to apply for a loan of up to $100,000. The maximum value of the loan available is $10,000 plus $1,800 per full time equivalent employee. Loans are interest free for a period of up to two years (if fully repaid in that time).
The Business Finance Guarantee is also available to provide greater confidence in business lending.
Robyn Walker
National Technical Director - Tax
Deloitte New Zealand
04 470 3500
www.deloitte.co.nz
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