Fact sheet on Economic Response Package to COVID 19
The New Zealand Government has released an economic response package to help cushion the impact of COVID-19 and support the economy during the COVID-19 crisis. This fact sheet highlights the areas of help for businesses in NZ. It does not cover every aspect of the Government response. To learn more in general please visit: https://covid19.govt.nz/
The economic package includes fours areas of financial support:
- Wage subsidy scheme
- Leave and self-isolation support
- Business cash flow and tax measures
- Wider $12.1 billion package
These are expanded on below and can be read about at here.
One important point on the wage subsidy scheme and leave and isolation support is that in each case it is the employer who applies for and receives the payments. Whether the employer keeps these payments or passes them onto the employee depends on whether the payment is made under a wage subsidy scheme or leave and isolation support application.
Wage subsidy scheme – Overview
Wage subsidies will be available for all businesses significantly impacted by COVID-19 including:
- employers that are struggling to retain employees
- sole traders
- new and existing businesses.
Wage subsidies will be available for businesses in all sectors and regions that can show a 30% decline in revenue for any month between January and June 2020 compared to the year before (including projected revenue).
The subsidy will be:
- $585.80 per week for a full-time employee (20 hrs or more);
- $350.00 per week for a part-time employee (less than 20 hrs).
The payment will be made as a lump sum for a period covering 12 weeks. This means employers will receive a payment of $7,029.60 for a full time employee and $4,200 for a part time employee. The maximum amount any one employer can receive is $150,000.
Wage Subsidy scheme – The detail
COVID-19 employer support (external link) — Work and Income
NZBN (external link) – New Zealand Business Number
Who can get it?
If you’re an employer, contractor, sole trader or self-employed, you may qualify to get the COVID-19 wage subsidy.
- your business must be registered and operating in New Zealand
- your employees must be legally working in New Zealand
- the 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, and that decline is related to COVID-19
- your business must have taken active steps to mitigate the impact of COVID-19
- you must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
What does registered and operating in New Zealand mean?
This means that a business is:
- registered with the New Zealand Companies Office, and
- physically located in New Zealand, and
- their employees legally work in New Zealand.
Sole traders are not required to be registered with the New Zealand Companies Office, but must have:
- a personal IRD number for paying income tax and GST, and
- government licences and permits for their business needs, and
- qualifications or registrations for their trade or profession.
- Sole traders must still meet the requirements to be physically located and legally working in New Zealand.
What does legally working in New Zealand mean?
Legally working in New Zealand means a person is both working in New Zealand and is legally entitled to work in New Zealand. A person is legally entitled to work in New Zealand if they:
- are a New Zealand or Australian citizen (including a person born in the Cook Islands, Niue or Tokelau), or
- have a New Zealand residence class visa, or
- have a New Zealand work visa or a condition on their New Zealand temporary visa that allows them to work in New Zealand.
Click here for more information.
What does a 30% decline in revenue mean?
This means a business has experienced a 30% decline in:
- actual revenue, or
- predicted revenue (e.g. for businesses who have seen a reduction in bookings such as accommodation providers), and
- that decline is related to COVID-19.
- The business must experience this decline between January 2020 and 9 June 2020.
Definition of revenue
Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.
Determining a decline in revenue
To determine a decline in revenue, the business must compare one month’s revenue against the same month the previous year (e.g. February 2020 compared with February 2019). The revenue of the month in the affected period must be at least 30% less than it was in the month it was compared against.
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.
What are active steps to mitigate the impact of COVID-19?
A business must take active steps to mitigate the financial impact of COVID-19 on their business. This could include activating their business continuity plan and seeking advice and support from:
- their bank
- the Chamber of Commerce
- a relevant industry association
- the Regional Business Partner programme
What does retaining affected staff mean?
Employers are required to agree that, for the duration of the subsidy, they will make best efforts to:
- retain the employees the subsidy was paid for, and
- pay those employees a minimum of 80% of their normal wage or salary.
The subsidy is being administered under a high trust model and employers will not be asked for verification before the subsidy is approved. However MSD will have the ability to check applications and verify information at a later date. Where false or misleading information has been provided, employers can be subject to fraud investigation.
To receive the COVID-19 Wage Subsidy, the employer must agree:
That they meet the following subsidy eligibility criteria:
- the business is registered and operating in New Zealand
- their business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year (or a reasonably equivalent month for a business operating less than a year) and that revenue loss is attributable to the COVID-19 outbreak
- they have taken active steps to mitigate the financial impact of COVID-19 on their business activities
- the employer will make best endeavours to retain the named employees and pay them a minimum of 80% of their normal wages or salary for the duration of the subsidy
- the employer has discussed the application with the named employees, who consent to the information in the application:
- being provided to MSD; and
- being used by MSD, and shared with other agencies, to make decisions about the application, and to review and audit any subsidy granted
- the employer consents to the information in the application being verified with other agencies
- the employer is aware that they may be audited, and if they provide false or misleading information, they may be investigated for fraud
- the employer will notify if circumstances change that affect their eligibility
- the employer will repay any amount to which they are not entitled.
Reviewing decisions to decline the subsidy
Decisions to decline the COVID-19 Wage Subsidy are not made under the Social Security Act 2018 and are not covered by the usual Review of Decision guidelines.
If an employer wishes to review the decision to decline the subsidy, that decision should be reconsidered. This review should be based on whether an ‘informed’ decision was made and should consider the following:
- whether all relevant information obtained, and
- whether the appropriate options and implications were considered, and
- whether the decision was made at the appropriate level of delegation.
Application Process for wage subsidy and leave support is the same. The process is outlined at the end of this document. For further information, please click here.
Leave and self-isolation support – Overview
Workers and businesses have responsibilities to prevent the spread of COVID-19. The purpose of the COVID-19 leave and self-isolation scheme is to support workers financially to self-isolate, or while ill with COVID-19, where this is required so that all businesses and workers can do the right thing.
From 17 March 2020, the COVID-19 leave payment will be available to support people financially if they:
- need to self-isolate
- can’t work because they are sick with COVID-19
- can’t work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19.
The payments will be:
- $585.80 per week for a full-time worker
- $350 per week for a part-time worker.
The COVID-19 leave payment will be available for eight weeks from 17 March 2020. Employers will be able to apply for this more than once.
Leave and self-isolation support – The Detail
Self-isolation is an important way to slow the spread of COVID-19. From 17 March 2020 the COVID-19 Leave Payment will be available to support people financially if they:
- need to self-isolate (as determined by the Ministry of Health guidelines),
- cannot work because they are sick with COVID-19, or
- 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 eight weeks from 17 March 2020. 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.
Who can get it:
If you’re an employer, contractor, sole trader or self-employed, you may qualify to get the COVID-19 Leave Payment.
COVID-19 Leave Payment covers full-time, part-time and casual employees, and contractors who are legally working in New Zealand and who:
- need to self isolate in line with Ministry of Health Guidelines and have registered as needing to self-isolate with Healthline, cannot work from home and their self-isolation is not because they left NZ since the travel restrictions on 16 March 2020 and have since returned; or
- cannot work because the person has been diagnosed with COVID-19; or
- cannot work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19.
How much you can get?
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
- $350.00 to a person working less than 20 hours per week.
Employers receiving the payment for employees who are required to self-isolate can receive it for 14 days. As people may be required to self-isolate more than once, employers will be able to apply for this on an ‘as needed’ basis. It can be paid for the entire period an employee is sick (or looking after a dependent person who is sick) with COVID-19 but the employer must apply every 14 days.
Using paid leave entitlements or COVID-19 Leave Payment when self isolating?
You and your employee can agree to use any form of paid leave (eg annual leave) to cover their period of self-isolation. However, employees aren’t required to have used any or all their paid leave entitlements before they can receive this payment.
Eligible employers and employees
When applying for the Leave Payment the employer will consider whether:
- the employee was legally working for their employer at the time they decide to self-isolate; and
- they were expected to work for the period of self-isolation.
Self-employed people who are legally working in New Zealand are eligible for the payment if they:
- are usually earning the minimum wage when they decide to self-isolate; and
- were expecting to work for the period of self-isolation; and
- cannot draw an income for the period of self-isolation.
Some people aren’t eligible for the payment, including:
- self-employed people not earning at least the minimum wage
- people not legally working in New Zealand
State sector employers cannot receive the payment as it is expected they will pay employees their normal wages through periods of self-isolation. State sector employers include: Government agencies, crown entities, eg Kainga Ora, ACC.
The following employers can access the COVID-19 Leave Payment:
- Early Childcare Centres
- Non-Government organisations
- Tertiary Education Institutions, eg:
- Polytechnics/Institutes of Technology
Application Process for wage subsidy and leave support is the same. The process is outlined at the end of this document. Click here for further information.
Business cash flow and tax measures
There are a number of business cash flow and tax measures that have been announced, including:
Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by COVID-19:
- To support businesses and individuals impacted by COVID-19, the Government is proposing to give Inland Revenue the discretion to write-off use of money interest (UOMI) on payments due on or after 14 February 2020 if a taxpayer’s ability to make a tax payment on time has been significantly adversely affected by the COVID-19 outbreak.
- Under the current proposal, UOMI could be remitted for a maximum of two years past the date of enactment, but the actual length will depend on the circumstances of each business or individual.
- Once legislation is passed, IRD will create guidance to help people determine if they are likely to be eligible and if they’ll need to provide evidence to show they’ve been financially affected by COVID-19. IRD expect the criteria to be similar to the following:
- The business or individual has been significantly affected by COVID-19.
- Their income or revenue has reduced by at least 30% compared to the same month 12 months earlier (if your February 2020 income is 30% lower than your income from February 2019, for example).
- They have explored other options to support them financially, such as talking with their bank about additional finance or re-negotiated other loans/overdrafts.
Four anticipated tax changes to help businesses:
- Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/2021.
- Increasing the small asset depreciation threshold from $500 to $1,000 — and to $5,000 for the 2020/21 tax year.
- Allowing depreciation on commercial and industrial buildings from 2020/2021.
- Removing the hours test from the In-Work Tax Credit (IWTC) from 1 July 2020.
Note: these changes are yet to be introduced into legislation but are anticipated to begin from 1 April 2020.
COVID-19 tax relief (external link) — Inland Revenue
Wider $12.1 billion package
There are further parts to the wider $12.1 billion package that you may be interested in, including income support and further investment in the health response.
More information on the wider package can be found from the Treasury.
Application process for wage subsidy scheme and leave and isolation support
I. Your situation is either:
- your staff are in self-isolation (or caring for others), or
- your business’s revenue has dropped due to COVID-19.
II. You can apply online and you will need:
- your IRD number
- your business name
- business address
- the names of your employees
- your employee IRD numbers
- contact details for your business and your employees
III. They will then check if you qualify.
IV. They may contact you if we need further information regarding your application which will be done by phone.
If it’s: approved
- They will email and text to confirm that they have approved the application and made a payment
- you receive the payment
If it’s declined
- you will be notified.
Click here to apply now.