COVID-19 Alert Levels –

Business Support available in March 2021

We are fielding many queries from clients on the current Covid supports available now, so here are details on the latest help available if your business can't trade as normal due to the current covid lockdown restrictions.  If you need to contact us during Auckland lock-downs we are working from home offices and available on mobile, or via our normal email contacts.

With the government's announcement that Level 3 (for Auckland) and 2 (for the rest of New Zealand) restrictions will be applicable for at least 7 days from 6 am on Sunday 28 February, the wage subsidy has been reactivated. The wage subsidy is available nationwide. In addition, all businesses (experiencing reduced income) have access to also claim the resurgence support payment.


Wage Subsidy
The Wage Subsidy Scheme will be available nationwide if any part of the country moves to Alert Level 3 or above for seven days or more.
Although the payment remains unchanged i.e. $585.80 per week for each full time worker and $350 per week for each part time worker, the eligibility criteria has changed.

Businesses and the self-employed will be eligible if they experience a 40% drop in predicted or actual revenue over a consecutive 14-day period, compared to a typical fortnightly revenue in the six weeks before the rise in alert level.
Businesses will need to be able to show that the revenue drop is due to the change in alert level, not just COVID-19 in general. We suggest you keep full details of the impact on your business at any time a subsidy is applied for, as these may be required to meet audit requirements later.

Whilst receiving the wage subsidy, businesses must pay employees, as a minimum, the value of the subsidy however every effort should be made to pay each employee at least 80% of their wages or salary. Employers should be mindful of the employment legislation and the employment contracts in place when considering wages reductions.

Applications will be available soon through the Work and Income website and are anticipated to be open in the next few days, in the first week of March 2021. Anybody can provide their e-mail address through this link to be informed when applications are open.

WINZ LINK

They will make payments for each fortnight the Level 3 restrictions last. The wage subsidy will be rounded up to the nearest fortnight.


Resurgence support payment
A Resurgence Support Payment may be activated by the Govt. each time the Covid alert level increases above Level 1 for a week or more. Once the Resurgence Support Payment has been activated it will be available nationally, even if the alert level is not increased across the whole country. It will only be available to claim after the event as it must be based on actual impact on your income $.

The Resurgence Support Payment is in the form of a grant and consists of a base payment of $1,500 per applicant plus $400 per full time equivalent (FTE) staff member up to a cap of 50 FTEs. This means maximum grant that a business can receive is $21,500.

For small businesses whose 30% reduction in income is lower, they are restricted to claim only a payment of 4 times their actual decrease income.

Businesses are eligible for a resurgence support payment if they experience a 30% drop in revenue over a 7 day period after an alert level increase compared to a typical 7 day period in the 6 weeks before the increase in alert level.Businesses must have been trading for at least 6 months to be eligible. The decline in revenue must be a result of the specific alert level change, not just COVID-19 in general, or other business changes
.

The resurgence support payment is to be provided once, every time Govt restrictions are put in place. Accordingly, a business could apply for the resurgence support payment each time the restrictions have been put in place. Applications will be available through myIR and will remain open for 1 month after the return to Alert Level 1.

The current round of applications (for the "Valentine's Day" alert level increase 14Feb21) is currently open and will close on 22 March 2021.

Applications for the current alert level increase, which commenced on 28 February 2021, will be available at a later date, after the lock-down level drops. Any claims must be based on actual data of income during the lockdown period, so cannot be applied for in advance.
Resurgence Support LINK

Note that eligible businesses can apply for both the wage subsidy and the resurgence support payment.

Note the change in comparison periods for the wage subsidy. Documents evidencing the decline in revenue should be kept.

 

Small Business Cashflow Loan Scheme
Many of our clients have also received this IRD loan. Businesses who employ 50 or fewer staff, can apply for the Small Business Cashflow Loan Scheme. Small to medium businesses and organisations may be eligible for a loan with a term of 5 years if they meet the eligibility criteria. Applications have been extended until the end of 2023.

The scheme will loan $10,000 to every eligible business plus an additional $1,800 for each full-time employee within the business (up to a maximum of $100,000). Loans are interest free if they are paid back within 2 years. After this time, the loans will be subject to interest at 3%.

A business is eligible if:

  • it has experienced a minimum 30% decline in actual or predicted revenue over the period of a month;
  • is viable and ongoing, and has a plan to ensure its ongoing viability;
  • the loan will be used only to cover capital costs and core operating costs (including, but not limited to, rent, insurance, utilities, supplier payments, or rates) and will not pass the loan through to the shareholders or owners, for example, by way of a dividend, or a loan, or drawings.

(Note we are aware of some clients who may end up in default of their loan agreement due to their use of the loan funds, please be aware of the rules, you should not repay your personal credit card with this loan).

Changes to the Small Business Cashflow Loan Scheme from February 2021:
The scheme extends to businesses that can demonstrate an actual drop in revenue of at least 30% because of COVID-19 over any 14-day period in the previous 6 months, compared with the same 14-day period a year ago. If the applicant was not in business a year ago, the 14-day period can be compared with the same or similar period in the previous month. Businesses must declare that the drop in revenue was due to COVID-19 and have records to support this.

Businesses established after 1 April 2020 and which have existed for 6 months will now be eligible for a loan if they meet other eligibility criteria.

Businesses applying for the Small Business Cashflow Loan Scheme will be measured on the number of employees they have at the point they apply. The limit to the number of employees has not changed, only the date at which they are calculated. Previously, employee numbers were measured at the point the business received the wage subsidy or 9 June 2020.

With these loan applications open till 2023, businesses will be able to draw down a second loan, if they meet the eligibility criteria and have repaid the original loan in full. If a business has defaulted on a previous Small Business Cashflow Loan, they will not be eligible to re-borrow.

Agents are unable to apply for these loans, only the business owners as you are entering a loan agreement.



Diane emailed another newsletter to clients on 23 February 2021, however it appears that some clients may not have received that article. Apologies if you missed it - please email Diane to get another email copy, or view it on our website via this link to February 2021 tax updates in  ARCHIVE NEWSLETTERS