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“If you can’t fly then run, if you can’t
run then walk, if you can’t walk then
crawl, but whatever you do you have
to keep moving forward.”

March 25, 2020 | Latest News

Tax Treatment of Covid-19 – payments, Mortgage Relief and Business Finance Guarantee scheme

IRD have clarified the below treatment 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.

On Tuesday, 24 March, the Government confirmed a mortgage holiday for those affected by coronavirus.

The key facts of the announcement were:


  • The scheme would run for 6 months
  • It would include a principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from Covid-19
  • The Government concern is that there are 67,000 jobs on the line and this method was intended to protect people from losing their homes as a result of the virus.
  • Major trading banks are still to provide details.


BUSINESS LOANS SCHEME (Business Finance Guarantee Scheme)

Again on Tuesday, 24 March, the Government indicated a new arrangement with the major trading banks, where the Reserve Bank reduced the core funding ratios from 75% to 50%, which assists Banks to make credit available.

Key points to note are;


  • This 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 loan will be for a period of 3 years.
  • The Government expects the banks to provide this facility at competitive and transparent rates.
  • The Government will share 80% of the risk, with the remaining 20% being carried by the banks.
  • It is important that the government has made the discretion between solvent businesses at this point, so if your business was insolvent, you may well struggle to get the loan
  • The banks will have absolute discretion as to who get the loans and not the Government.
The Finance Minister has stressed that businesses need to keep paying their bills and those businesses that are able to, should continue to pay other businesses.