The bulk of the package comprises spending of:
- $8-10b to support businesses, the self-employed and jobs through the wage subsidy (see below for more details);
- $2.8b in assistance to those receiving benefits, via a $25 per week increase in core benefits from 1 April and a doubling of the winter energy payment;
- The Government and the banks have implemented a $6.25b Business Finance Guarantee Scheme for small and medium-sized businesses. This is to provide short-term credit to cushion the financial distress of SMEs. The 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 loans will be for a maximum of three years and expected to be provided by the banks at competitive rates. The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.
Wage subsidy scheme
- The bulk of the business support was in the form of the Wage Subsidy Scheme to help employers recover from the effects of COVID-19. It helped employers to keep their staff employed and ensured an income for affected employees for up to 12 weeks. There have been two further extensions to the scheme but it has now ended.
- Government assistance is available to all sectors and industries.
Small Business Cashflow Loan Scheme
- Inland Revenue provide interest-free loans for a year to small businesses impacted by COVID-19. The Small Business Cashflow Loan Scheme provides up to $100,000 to firms employing 50 or fewer full-time equivalent employees. Loans are interest-free if they’re paid back within a year. The interest rate is 3% for a maximum term of 5 years. Repayments are not required for the first 2 years.
Business cashflow and tax measures
Included in the Government’s response are a number of tax measures:
- A tax loss “carry back” rule to allow refunds of tax paid in a prior year—a temporary rule for tax losses in the 2020 and 2021 tax years has been enacted and a permanent rule for future years is expected to be introduced later this year.
- A same or similar “business test” to allow tax losses to be carried forward—this is intended to help companies to raise capital (legislation is expected to be introduced later this year).
- The reintroduction, from the 2020-21 income year, of a 2% DV depreciation deduction for commercial and industrial buildings. This includes hotels and motels.
- Bringing forward R&D refundability rules to the 2019-20 income year.
- A temporary increase in the threshold for expensing low-value assets from $500 to $5,000 during the 2020-21 income year. The threshold will be $1,000 from the 2021-22 income year.
- The threshold for paying provisional tax has increased from $2,500 to $5,000 of residual income tax, from the 2020-21 income year.
- These measures apply to all businesses.
Apprenticeship Boost Initiative
A $380 million recovery package is available to employers of first and second year apprentices in a Tertiary Education Commission-approved New Zealand Apprenticeship or Managed Apprenticeship programme. The amount that can be claimed will vary depending on when an apprentice started their training programme and when they reach 24 months. Employers can claim:
- $1,000 a month for eligible apprentices in the first 12 months of their training programme
- $500 a month in the second 12 months of their training programme.
Funding will be available until April 2022. Employers are required to top up the funding they receive to ensure their apprentices receive at least the minimum or training wage they are legally entitled to.
A $12 billion infrastructure package has been announced, comprised of $6.8 billion for roading and other transport initiatives, as well as spending on hospital upgrades.
The general parliamentary election will be held on 17 October 2020. The pre-election period has in the past been subject to a “caretaker” convention until a new Government is formed. A number of initiatives have been announced by the various political parties as part of their election manifestos. It is expected that further concrete initiatives will be announced after the election by the new Government.