The COVID-19 outbreak is at the front of many people’s minds right now, especially for business owners. A recession in New Zealand is now almost certain so we’re here to help business owners as they navigate these challenges.
The business support package
The government announced its $12.1 billion support for New Zealanders and business. This package includes:
- $2.8 billion in business tax changes to free up cash flow, including a provisional tax threshold lift, the reinstatement of building depreciation, and writing off interest on the late payment of tax.
- $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from yesterday. Full time workers will receive $585 per week under the scheme but to qualify, businesses need to show that they have had a 30% decline in revenue due to COVID-19 month-on-month for any month between January and June this year (compared to last year), and that they have talked to their bank about assistance.
What that means for you and your business
Provisional tax
If you're a small business that pays provisional tax, the payment threshold has been raised from $2,500 to $5,000 for the 2020/2021 tax year onwards. That means if you have less than $5,000 tax to pay at the end of the 2019/2020 tax year, you can opt to pay a lump sum due April 7 2022 (if you use a tax agent/accountant, otherwise it will be due February 7 2022), rather than pay instalments throughout the year. This will free-up some cash, and lower your compliance/accountant costs. This change will be permanent. Talk to your accountant or business advisor about this, or see IRD.
Late tax payments
If you've got a tax bill due on or after February 14 2020 but can't spare the cash to pay it off in full, you can apply to IRD about getting an interest write-off on any late payments. You can then get a payment instalment agreement set-up. You'll need to talk to your bank about getting lending for this first though. Talk to your accountant or business advisor about this, or see IRD.
Wage subsidies
If you've got employees (or are a sole trader or self-employed), there's support for your business if you're impacted by COVID-19, and face laying off staff or reducing their wage below 80%. The full-time subsidy (20 hours or more) is $585 per week, and the part-time subsidy (less than 20 hours) is $350 per week per employee.
To qualify:
- You must undertake best efforts to pay your employees 80% of their pre-COVID income. If that's not possible, for example your business has no activity due to the shutdown and your employees aren't working any hours, then you pass on at least the whole subsidy value to each affected employee.
- Your business must undertake to keep employees in employment for the period of the subsidy.
- Your business must be registered and operating in New Zealand.
- Your employees must be legally working in New Zealand.
- The scheme covers all businesses, registered charities, non-governmental organisations, incorporated societies, and post-settlement governance entities.
The full summary is on Work and Income.
As an employer you apply on behalf of your staff at Work and Income. There's also a great list of commonly asked questions online here as well.
Leave subsidies
The government are folding the previous sick leave scheme into the wage scheme to prevent double-dipping. The original sick leave scheme was designed when few people were in self-isolation, so that makes it no longer fit for purpose. There will be further updates to this as the government are working on arrangements for those in essential work who require sick leave due to COVID-19.
What you can be doing
Cash flow
We recommend that you review your business cash flow forecast for the next few months and consider how much headroom you need if incoming cash drops. If you think that you may have difficulties with cash please contact your RightWay business advisor who can help you start a conversation with your bank, landlord, and other stakeholders as needed. We can also prepare a cash flow forecast for you if you need this.
Turn over
You must have a 30% decline in revenue for any month between January and June compared with the same month in last year to access the wage subsidy scheme. Keep an eye on turn over and speak to us if you need any help with doing so.
Speak with your bank
To access to the wage subsidy scheme you need to have evidence of discussions with your bank. We can help you be prepared for this conversation with the right reporting and numbers.
Employees
If you're starting to look at whether redundancies need to occur in your business, or at the very least, a reduction in hours worked by your employees, please get an HR expert to give you advice. We have an HR team at RightWay that can talk through your unique circumstances and provide advice around either retaining, or reducing the size of your workforce. There can be significant financial implications for employers who fail to follow the correct process, which is additional stress and anxiety that can very easily avoided.
Business continuity plan
Now is a good time to look at how you address challenges in your business strategically, so you've got a plan to navigate any disruption. To ensure the long-term sustainability of your business, you should have a plan to ensure you can still conduct business during such times (known as a business continuity plan, or BCP). If you’re wanting to discuss your BCP, a RightWay business advisor will be able to help you with this.
Look after yourself and your staff
There is no doubt that this is an unsettling time, no matter how you're affected by COVID-19. Looking after your wellbeing should also be at the top of your list of priorities. The Mental Health Foundation has a support page on their website with some great tips. And don't forget you can access the Xero Assistance Programme for free if you're a Xero customer. This will give you access to free and confidential wellbeing support.
Get help
Please don’t hesitate to reach out to us for support and advice. We have business advisors, accountants, and HR specialists that can chat to you about how to navigate these challenges, what options you have in your business, and they can work through a step by step plan with you.
Meeting with RightWay
If you would like to catch up with any of the RightWay team, we have a video meeting system! We can meet and talk to you from anywhere. We have business advisors, accountants, bookkeepers, and HR specialists around NZ who are available to help you.
We’ll be looking to provide more information and content over the coming weeks!
