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Government extends COVID-19 economic support package
Released: 23 March 2020
In this special Tax Tips Alert:
Earlier today, the New Zealand Government announced an unprecedented suite of measures to contain the further spread of COVID-19. From Wednesday (25 March 2020) the country will move to “Alert Level 4: Eliminate” of the Government’s recently announced COVID-19 Alert System. The range of measures applied under Alert Level 4 are:
Schools and other educational facilities will close.
“Non-essential” businesses will close.
Rationing of supplies and requisitioning of facilities.
Travel will be severely limited.
People are instructed to stay at home.
Only essential businesses will remain open during this time. These include:
supermarkets
banks
pharmacies and medical facilities
couriers
petrol stations, and
providers of essential infrastructure services (e.g. water, energy, and telecommunications).
The measures will be in place for at least four weeks.
As a result of these unprecedented measures, the Government has announced further economic support for affected individuals and businesses. We appreciate that these support measures are being developed under urgency, and there are many details that are being worked through as the policies are being implemented in practice.
Wage subsidy scheme
Previously, the Government announced that businesses or sectors that can demonstrate a decline in monthly revenue of 30% can access the following payments:
$585.80 per week for a full-time employee (20 hours or more)
$350.00 per week for a part-time employee.
Under the earlier scheme, there was a $150,000 cap on the total amount of the subsidy that could be claimed by any one employer. Today, the Minister of Finance announced that the $150,000 cap will be removed. This will inject a further $4 billion into the economy over the next 11 weeks.
Other changes to the scheme announced by the Government today include:
New businesses (e.g. that are less than a year old) and high-growth firms (e.g. firms that have had significant increase in revenue) are also eligible. They need to demonstrate the revenue loss assessment against a similar time period - for example, a 30% loss of income, attributable to COVID-19, in March 2020 compared to January 2020.
Self-employed people with variable monthly incomes are eligible if they can demonstrate the revenue loss assessment against the previous year’s monthly average (e.g. 30% loss of income attributable to COVID-19 comparing March 2020 to the average monthly income in the period March 2019 to March 2020).
The scheme will cover registered charities, non-governmental organisations, incorporated societies, and post-settlement governance entities.
The subsidy can be accessed by way of an online application to the Ministry of Social Development (MSD).
Other measures
In addition to the extension of the wage subsidy scheme, the Government has announced that it has made in-principle decisions regarding a number of other economic and financial measures. The detailed design and delivery of this support is currently under development. Further details will be provided by the Government later this week.
New income support measures
The Government is investigating new income support for all workers, in addition to the wage subsidy scheme described above, in the light of the requirements to close businesses and other measures under Alert Level 4.
Temporary support for borrowers
The Government, the Reserve Bank of New Zealand, and retail banks have agreed the following measures to support those affected by the move to Alert Level 4:
temporary support for mortgage holders, and
a business finance guarantee scheme.
Rent freezes and tenant protection
All rent increases will be frozen and the Government may introduce measures to ensure that tenants cannot be evicted without cause (i.e. no-cause terminations) during this period.
Tax issues
In addition to the recently announced measures, including tax changes which we summarised in our previous Tax Tips Alert, there are a number of tax issues and solutions under the existing rules which should be considered during this time to help with cashflow including:
deferring tax payments (including corporate tax, PAYE, GST and customs duties)
financing upcoming provisional tax instalments for up to 12 months through tax pooling
writing off bad debts, and
tax support on business restructuring.
For further guidance on how these measures can help you and your business at this difficult time, please reach out to your usual PwC adviser.
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