On 17 March the Government released its fiscal and economic response to the COVID-19 pandemic. It was originally costed at $12.1b which is equivalent to around 4% of New Zealand’s annual GDP. Changes have been made to the package over the last few days as New Zealand moved to alert level 4 at 11:59pm on 25 March 2020. The package is now expected to cost approximately $17-18b. The bulk of the package comprises spending of:
The more recent extension to the package includes the following:
For businesses and the self-employed, there is a wage subsidy scheme (the accompanying leave payment scheme was discontinued with effect from 3:00pm 27 March 2020, although applications submitted before then will still be processed by Work and Income New Zealand). A new leave scheme for essential workers was announced on 2 April 2020 – further details are provided below.
More detail of these payments can be found at the links below. We have summarised the key parts of each policy. However, as the policy has been developed and evolved quickly, there remain unanswered questions.
Please check our Q&A page which we will keep updating as more information becomes available on the wage subsidy and other relief available to businesses.
The wage subsidy is available to employers, contractors, sole traders, the self-employed, registered charities, incorporated societies, non-governmental organisations and post-settlement governance entities. The businesses must be registered and operating in New Zealand.
The wage subsidy is aimed at allowing employers to continue to employ staff. The subsidy is $585 or $350 per employee for 12 weeks depending on whether the employee works for more or less than 20 hours per week.
There is no cap on the subsidy (originally there was a cap of $150,000 per organisation.)
There are some key matters to accessing the scheme:
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 30% revenue loss over a relevant period, for example, March 2020 compared to January 2020, rather than to last year’s equivalent month.
The application is made online.
The Government has announced a new scheme to assist essential businesses (click here for Government advice on what businesses qualify) to pay staff who need to take leave to comply with public health guidance e.g. to self-isolate.
Details of the scheme are still being finalised, however, the same rates as the Wage Subsidy Scheme of $585.80 per week fulltime and $350.00 per week for part time workers will apply. Payments will be four-weekly with the option for essential businesses to re-apply for those same workers after four weeks or make further applications for additional workers who are eligible at any time, while the scheme remains open. The scheme will be available for at least the period while the nation is at alert level 4 and will be reviewed after eight weeks.
Employers accessing the scheme are expected to pay employees at either:
According to the announcement, employees who are on other forms of paid leave are expected to be paid at their usual full rates of pay.
Applications can be submitted from Monday 6 April at midday and is administered by MSD.
For further information on the scheme, click here.
The Government also announced tax changes. Included in the Government’s response are a number of tax measures:
These are covered in our Taxmails on the Government's COVID-19 fiscal and economic response package and on COVID-19 Tax Act and late payment and were included in the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act which was enacted on 25 March 2020.
The Act also allows refunds of research and development tax credits one year earlier than planned (for the 2019-20 income year rather than for the 2020-21 income year. This had not been previously announced.
If you have difficulties with tax payments, Inland Revenue can accept instalment arrangements through MyIR or through agreement with their debt recovery team. Inland Revenue announced its intention to waive penalties and interest for late payments in a media release on 25 March 2020. There are no apparent requirements but further detail and explanation may follow.
The extension of the package is welcome as assisting to improve business liquidity in the short to medium term.
The Government response is evolving as public health measures are taken and the effects of the packages are assessed. The removal of the $150,000 limit for the wage subsidy is an example.
There will also be further specific initiatives for specific sectors and across the broader economy. For example:
If your business includes activity outside New Zealand or you have an interest in what the rest of the world is doing, we have summarised country tax responses to COVID-19 in our COVID-19 Global Tax Developments Summary PDF.