Most businesses are operating relatively normally, but there are some sectors which continue to experience a significant decline in consumer activity and revenue. Because of this, the Government has announced additional financial support for businesses that are experiencing cashflow pressures due to the Omicron outbreak. The package includes:
- Further COVID support payments
- Changes to the Small Business Cashflow Scheme, and
- Extension of Inland Revenue’s ability to remit penalties and interest.
New targeted COVID-19 Support Payment available
The COVID-19 Support Payment (CSP) will help support viable businesses or organisations which have experienced a 40% or more drop in revenue due to COVID-19.
The CSP will be available on a fortnightly basis over six weeks, with three payments in total. Each CSP will need to be applied for separately.
Eligible businesses will receive $4,000 per business plus $400 per full-time employee (FTE). This will be capped at 50 FTEs or $24,000.
Businesses or organisations with low revenue will have their payment capped at eight times their actual decline in revenue.
Drop in revenue
- To be eligible, a business or organisation must have experienced a revenue decline of 40% or more as a result of one or more COVID-19 circumstances. These being the widespread presence of COVID-19 in the community, legislative public health measures taken to reduce the spread of COVID-19 in the community, and any business circumstances that are, or are reasonably likely to be, a consequence of the first two circumstances.
- There will be two time periods against which you can compare your current revenue to be eligible for the payment. To receive the first payment, you will need to show a drop in revenue of 40% or more in a seven-day period any time from 16 February compared to a typical seven-day period covering:
- 5 January 2022 and 15 February 2022, or
- 5 January 2021 to 15 February 2021 (when all of New Zealand was at Alert Level 1).
- The dates of the affected revenue period for the second and third payments are still to be decided.
- The affected revenue period and the comparison period must be calculated based on what has happened, not a forecast of what might happen.
In addition to the above, to be eligible for the CSP a business or organisation must:
- have taken all reasonably practicable steps to minimise revenue losses.
- been operating in compliance with the COVID-19 Vaccine Certificate requirements.
- have been operating the business or organisation for a period of at least one month before 16 February 2022. If you have acquired a business or organisation after 16 January 2022, you may still be eligible for the CSP.
- be living, or (if a non-natural person) registered or otherwise established in New Zealand.
Applying for the CSP
Businesses can apply for the CSP using the 5 Jan – 15 Feb 2022 revenue comparison period from 28 February, with payments starting from 1 March 2022. The first payment will be open for at least six weeks.
Inland Revenue will be making changes to its system to allow businesses to apply under the 5 Jan – 15 Feb 2021 comparison period. This is expected to be available from 14 March 2022. Businesses will be able to use this option to apply for each of the three payments.
For more information visit ird.govt.nz/csp.
Changes to the Small Business Cashflow Scheme (SBCS)
The Government has announced the base SBCS loan will be increased to $20,000 (from $10,000). The amount that can be borrowed will be $20,000 plus $1,800 per full-time equivalent employee (up to 50 employees).
The loan repayment period remains at five years (60 months) and the first two years of existing loans will become interest-free (provided the loan is not in default). Interest will apply at a rate of 3% per year on the remaining loan balance from the first day of the third year of the loan period.
New borrowers, and those that have already paid back their loan before 31 December 2023, can borrow up to the new maximum amount as a lump sum or as up to four instalments before the end of the scheme. The first two years of the loan will be interest-free from the date the loan is made available to them.
Top up for loan existing borrowers
If you already have a loan (and have not defaulted on this) you will be able to apply for a top-up loan of $10,000. If you did not borrow the full amount you were able to in your existing loan, you will also be able to add this amount to your top-up loan.
The top-up loan will have a new five-year repayment period, with the first two years being interest-free. You can borrow the whole amount at once, or in four separate withdrawals taken out before the end of 2023.
Further information is available at ird.govt.nz/sbcs. You can apply for the SBCS loan and the top-up loan through your myIR account at ird.govt.nz.
Extension of Inland Revenue’s ability to apply flexibility for tax payment dates and terms
Inland Revenue’s ability to remove (remit) interest if a business is late paying its tax because they are adversely affected by COVID-19 has been extended.
It’s important that businesses contact Inland Revenue as soon as they know they will not be able to pay their tax on time. Inland Revenue can remit penalties and interest for tax payments that were due on or after 14 February 2020 up until 7 April 2024 (including provisional tax).
As Inland Revenue may check the declaration that the business was significantly affected by COVID-19, businesses should keep records such as bank and credit card statements, management accounts, and debtor and creditor lists.
More information on requesting financial relief is available on the Inland Revenue website.
Our William Buck advisors are also able to provide support if you have any questions or need advice – we’re here to help.