New Zealand

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Return to homepage  |  Last updated: 14 October, 2020

NZD 12.1 billion business continuity package:

• NZD 5.1 billion in wage subsidies for affected businesses in all sectors and regions;
• NZD 126 million in COVID-19 leave and self-isolation support; 
• NZD 2.8 billion income support package for most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020;
• NZD 100 million redeployment package; 
• NZD 600 million initial aviation support package.
  

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

• The Reserve Bank announced an emergency policy rate cut by 75 basis points, to 0.25%. The Reserve Bank has committed to the OCR remaining at 0.25% until 2021 while asking financial institutions to be ready for a negative OCR by 1 December 2020.  This has raised expectations that a negative OCR will occur in 2021.
• The Reserve Bank announced further measures to support commercial banks to strengthen liquidity.
• It has also announced it is buying up to $100bn of bonds in the secondary market by June 2022. The Large Scale Asset Purchase (LSAP) Programme includes NZ Government Bonds, Local Government Funding Agency Bonds and NZ Government Inflation-Indexed Bonds.

A Small Business Cashflow Loan scheme to be administered by Inland Revenue

The key features of the loan scheme are as follows:

• Up to $100,000 to firms employing 50 or fewer full-time equivalent employees. The loan amount is calculated as $10,000 for an applicant plus $1,800 per full time employee.
• The eligibility criteria are:
  • The wage subsidy scheme criteria.
  • A declaration that the business is viable and will use the money for core business operating costs.
• The business and Inland Revenue will have a legally binding loan contract.
• The loan will be for a maximum 5 years, with repayments not due in the first 2 years.

• Inland Revenue will administer and audit the scheme, with applications open from 12 May. The Act passed the 30th April contains specific provisions relating to the administration of the scheme. A decision to grant or decline a loan will not disputable and information can be shared with the Ministry of Social Development (MSD) (the administrators of the wage subsidy) to administer the scheme.
• As of 30 September, Auckland is at Alert Level 2, with the rest of New Zealand at Alert Level 1.  The Government will review Auckland’s Alert Level on 5 October to confirm whether it should shift to Alert Level 1.
• Businesses are required to display a QR code and provide an alternative contact tracing system.  Controls at the borders remain for those entering New Zealand. This includes health screening and testing for all arrivals, and mandatory 14 day managed isolation or quarantine. There are no domestic travel restrictions.
• Under Alert Level 2, physical distancing of 2 metres is recommended in public spaces, with 1 metre in workplaces, cafes, restaurants and gyms.  Face coverings are required on public transport and aircraft.  Social gatherings (including birthdays, weddings and funerals) are limited to 100 people.

Leave support scheme

• The COVID-19 Leave Support Scheme is available for employers to help pay their employees who need to self-isolate and can't work from home, as well as the self-employed. The Leave Support Scheme is paid as a lump sum and covers 2 weeks per employee. Who can get the COVID-19 Leave Support Scheme

New Zealand: Budget 2020

• This budget starts answering the question of what is next. The answer is focused on the immediate and to some extent the horizon. The budget 2020 has targeted certain sectors but also broadened its help through several schemes. It makes further commitments on a pandemic response. It includes a short extension to the wage scheme, on environmental work, on trades training, housing and on infrastructure.

Main sources of information

• Small Business Cashflow Loan scheme to be administered by Inland Revenue
• NZ Government
• New Zealand: Tax guidance for employers and employees (COVID-19)
• New Zealand: Relief relating to APAs, response to coronavirus (COVID-19)
• New Zealand: Tax relief in government's response to coronavirus (COVID-19)
• COVID-19: Information for businesses
• Financial system sound, and Reserve Bank providing additional support
• COVID-19 Economic Package updated
• New Zealand: Tax relief legislation enacted (COVID-19)

Duty Relief

• Importers unable to pay Customs duty and/or import GST due to impact of COVID-19 have access to payment options with Customs on a case-by-case basis
• Temporarily removed import tariffs on all medical and hygiene imports needed for the COVID-19 response. Applies to all diagnostic reagents and testing kits used for COVID-19 testing and soap imports. Two already approved are:
  • Concession 311042H: Soap, of a kind suitable for use in the COVID-19 event
  • Concession 311043F: goods covered by this concession include both:
  • COVID-19 testing kits
  • Diagnostic reagents, of a kind suitable for COVID-19 testing
• New Zealand and Singapore initiative to ensure supply chain connectivity and the removal of blockages to trade in a list of essential products that includes medicines, medical and surgical equipment. This is an “open plurilateral” initiative, so other countries can join.
  • A number of tariffs removed immediately and 18 new tariff concessions have been created.

Excise

• Clients with negative cash flow implications from Alert Level 4 unable to pay excise duty on time have access to payment options with Customs on a case-by-case basis

Budget : NZD 50 billion COVID Response and Recovery Fund
Announcement : 17 March 2020 with subsequent announcements
Main orientations : Business continuity, maintaining employment and cashflow

Key measures

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.

Sectors/Industries/Areas affected

• 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.

Sectors/Industries/Areas affected

• 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.

Infrastructure

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. 

General election

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.

Tax: Tony Joyce – tjjoyce@kpmg.co.nz
Restructuring: David King – davidking@kpmg.co.nz
Legal: Rebecca Armour – rarmour@kpmg.co.nz