Covid-19 Update – Economic Response

Government’s $12.1 billion business continuity package

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COVID-19 Business Support Package announced

Tuesday 17th March – What you need to know

Today the government announced a COVID-19 support package for New Zealanders and businesses. The $12.1 billion package includes:

  • Initial $500 million boost for health
  • $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today
  • $126 million in COVID-19 leave and self-isolation support
  • $2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020
  • $100 million redeployment package
  • $2.8 billion in business tax changes to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax
  • $600 million initial aviation support package

 

More information? Where to apply?

You can apply online through the MSD Work and Income website. Find more information on the Wage subsidy and Leave support payment scheme hereand to apply, follow the links to fill out the following online forms:

Employer application:

https://services.workandincome.govt.nz/ess/employer_applications/new

Self Employed/Contractor:

https://services.workandincome.govt.nz/ess/trader_applications/new

The Business Support package details

Below is further information on the subsidies, schemes, and measures the Government has announced. See the links and factsheets provided for further information.

 

Wage subsidies

Wage subsidy scheme factsheet.docx

The wage subsidies will be available for businesses in all sectors and all regions that can show a 30 per cent decline in revenue for any month between January and June 2020 compared to the year before (including projected revenue). If eligible, employers would be paid $585.80 per week for full-time staff, and $350 for part-time. Payments are capped at $150,000 per business. They will be paid in a lump sum. The support will be available for twelve weeks with applications open today. Businesses must have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank) and signed a declaration form to that effect. Estimated total cost: $5.1 billion

COVID-19 leave and self-isolation support

COVID leave support factsheet.docx

The COVID-19 leave payment scheme will provide support (through employers/to sole traders and the self employed) for those people unable to work because they are in self-isolation, are sick with COVID-19 or caring for dependents who are in either of these situations. The payments will be equal to the rate of the wage subsidy scheme but available for a maximum of eight weeks. Employers will be expected to meet all of their sick leave and other employment expectations. Estimated total cost: $126 million.

Fewer small businesses having to pay provisional tax

From April 1 2020 the threshold for provisional tax will lift from $2,500 to $5,000. This measure will reduce cashflow pressure and compliance costs for small taxpayers by allowing roughly 95,000 businesses to defer their tax payments. Estimated total cost: $4 million.

Reinstatement of depreciation deductions for commercial and industrial buildings

A reintroduction of depreciation deductions for commercial and industrial buildings will encourage business investment in the recovery phase and support productivity. It will support business confidence, continuity and recovery. Estimated total cost: $2.1 billion.

Waiving interest on some late tax payments

Interest is usually payable by taxpayers when they pay their tax late. The Commissioner of Inland Revenue will be given a time-limited discretion to remit interest if a taxpayer’s ability to make a tax payment on time has been significantly adversely affected by the COVID-19 outbreak. This measure will provide targeted relief to directly affected taxpayers facing cashflow pressures and apply for all tax payments due on or after 14 February 2020.

Immediate deductions for low value assets

Immediate expensing allows businesses to fully deduct the cost of low-cost assets when they are purchased, with the threshold for the write-off currently at $500. We are putting in place a temporary increase in the threshold to $5,000 for one year, reverting to $1,000 in the longer term (still higher than the current $500 threshold), which will reduce compliance costs for businesses. It will also have the side-benefit of stimulating business purchases. Estimated total cost: $667 million.

Support for large or complex businesses

Some businesses may fall outside the scope of the proposed business and employee support package (including working capital support), such as large or complex businesses. Officials have been asked to develop options so the Government can support larger businesses that have been materially impacted by COVID-19, where other avenues for support are not available, and the businesses are commercially viable over the longer-term. Any support would seek to mitigate the economic impact as adjustment occurs.

Working capital support for small and medium sized businesses

Officials are meeting with banks to discuss the potential for future working capital support, including in the form of loan guarantees for businesses that face temporary credit constraints.

Aviation Sector

The COVID-19 Cabinet Committee will discuss a package of measures to support the aviation sector and the protection of supply chains. This does not include any Government support for Air New Zealand. The estimated cost of this package is $600 million.

Income support package

Income support factsheet.docx

This package includes:

  • A $25 per week increase for all main benefits from April 1 2020. MSD estimates that this will increase the incomes of approximately 350,000 low income families. This will also help as more people who have previously been in work are likely to need income support in the coming months, and act as a stimulus.
  • The Winter Energy Payment for 2020 will be doubled to $1400 for couples and $900 for single people. It is estimated that around 850,000 recipients will benefit from this change. Once we include the partners of recipients, more than one million people are expected to benefit.
  • Removing the hours test from the In Work Tax Credit to assist those who may face variable hours.
  • Estimated total cost: $2.8 billion

 

Redeployment package

$100 million has been allocated to support worker redeployment. The Tairāwhiti region will be the first to receive assistance, with the package to be agreed by COVID-19 Cabinet Committee on Wednesday.

Other measures

These measures are in addition to steps the Government has already taken:

  • Expanded Regional Business Partner Programme ($4million)
  • MSD rapid response teams in regions hit hardest
  • Removed benefit stand-down periods
  • New Zealand Upgrade Programme that was announced in January ($12billion)

As always here to help, please do get in touch if we can be any assistance during these challenging times.

Source: https://hello.wecc.org.nz/covid-19/