Article

COVID-19: What government support is available for businesses?

Government assistance available for businesses 

By Robyn Walker
 

While New Zealand has coped exceptionally well with COVID-19 since March 2020, going back into Alert Level 4 at 11:59pm on 17 August has been a shock for many businesses who once again find themselves either completely unable to trade or materially constrained in how they can operate.

Given its now clear that parts of New Zealand will be in Alert Level 4 for at least 4 weeks before moving back through the Alert Levels, in this article we explain what assistance is available to support businesses at each Alert Level.

What is available at COVID-19 Alert Level 3 or 4

Each time Alert Levels escalate to Level 3 or higher in any part of New Zealand for a period of seven days or more, there is a new Wage Subsidy Scheme (WSS) put in place. In this instance, a WSS opened for applications on Friday 20 August 2021. A second round of the WSS is opening on Friday 3 September.

Many of the terms and conditions of the WSS are similar to those applied under the former schemes, however the amounts of the payments have increased to be $600 per week for a full-time employee and $359 for a part-time employee. Key features to be aware of include:

  • Support is being provided in two-weekly payments, for the duration of the COVID-19 Alert Level escalation, rounded to the nearest fortnight (e.g. if Levels 3 & 4 are in place for 22 days there would be an ability to apply for two rounds of payments, if Levels 3 & 4 remain in place for 36 days there would be three payment rounds, etc). Separate applications need to be made for each fortnight. This contrasts to the lump sum approach taken with the original Wage Subsidy (12 weeks) and the Wage Subsidy Extension (eight weeks).
  • Businesses will need to see a 40% reduction in revenue as compared to the typical fortnightly revenue during the six-week period immediately preceding the change in COVID-19 Alert Levels (in this case, the date range should be 6 July to 16 August 2021). The revenue loss will need to take place over a consecutive 14-day period in each subsequent fortnight. This can be based on a forecast revenue loss (provided it then materialises).
  • Businesses will be required to document and have available evidence of the decline in revenue being due to the change in Alert Level (e.g. it was not an expected normal decline in revenue due to normal seasonal variations).
  • Many other requirements remain consistent with prior schemes, such as seeking consent from employees to apply (ideally in writing), the requirement to retain staff, pass on the subsidy amounts to staff and taking active steps to mitigate the financial impact of COVID-19 (for example drawing on cash reserves, engaging with your bank and insurer).

The WSS is administered by the Ministry of Social Development. Applications for the first round can be made here until 11:59pm on Thursday 2 September and applications for the second round open on Friday 3 September at 9am.

For further details about the WSS please read our other article here.

Businesses receiving the wage subsidy cannot also be receiving Leave Support Scheme payments or Short-Term Absence Payments in respect of the same employees at the same time (these schemes are discussed further below).

What is available at COVID-19 Alert Level 2 and higher

A “Resurgence Support Payment” is available when New Zealand, or any region/s within the country, moves to COVID-19 Alert Level 2 (or higher) for seven days or more. A new Resurgence Support Payment is available for businesses given more than 7 days has already been spent at Alert Level 4.

This payment will be available to businesses which see a 30% or greater reduction in revenue as a consequence of the change in Alert Level.

To determine whether this criterion is met, businesses will need to show an actual 30% reduction over a seven-day period following the change in COVID-19 Alert Level, as compared with a typical seven days of revenue in the six weeks immediately before the change in levels. The RSP will be available to all businesses (including sole traders) that have been operating for six months or more (this will change to 1 month with effect from 9 September). Full eligibility criteria can be found here.

The value of the payment will depend on the size of the organisation; individual businesses will receive a payment of $1,500, plus an additional $400 per employee, up to a total of 50 FTEs. This means the maximum payment available will be $21,500 (noting there are specific rules for commonly owned groups). There is also a ‘lesser of’ test, meaning that the amount of the payment is the lesser of the amount calculated using the previously mentioned formula and four times the actual revenue decline.

It is worth noting that the RSP is subject to GST therefore GST registered businesses will need to return 3/23rds of the payment to Inland Revenue. However, input tax credits can then be claimed when the RSP is spent.

The RSP is administered by Inland Revenue and applications opened on Tuesday 24 August and remain open for one month after all of New Zealand returns to Alert Level 1. 

Recipients of the RSP will have their name listed on a public register as has occurred with previous RSP payments. Applications are required to maintain a full set of documentation supporting their eligibility to make a claim.

A business is able to apply for both the wage subsidy and the RSP if it meets the qualifications for each. The table below summarises the main similarities and differences between the two schemes:

 

Wage Subsidy

 

Resurgence Support Payment

 

Revenue drop

 

40% + compared with a typical 14-day period in the 6 weeks before 17 August 2021

 

30% + compared with a typical 7-day period in the 6 weeks before 17
August 2021

 

Revenue loss period

 

14 days – must be a 14-day period between 17 August to 31 August 2021 for round one Must be a 14-day period between 31 August and 13 September for round two

 

7 days – you can choose any 7-day period within the increased alert level period

 

Revenue or capital loss?

 

Revenue or capital raising ability for pre-revenue start-ups (tightly defined)

 

Revenue or capital-raising ability for pre-revenue businesses

 

Actual or predicted revenue loss?

 

Either – but a predicted revenue loss has to then be verified and the wage subsidy repaid if the revenue loss test was not satisfied

 

Actual – you can only apply for the RSP after you have suffered the 7-day loss

 

How much?

 

$600 per week for full time employees

$359 per week for part time employees

If an employee ordinarily earns less, the surplus should be applied towards paying other staff or repaid

 

$1500 + $400 per FTE, capped at 50 FTEs (i.e. $21,500)

Amount is also capped at 4x actual revenue decline

 

How long does it last?

 

Each wage subsidy runs for two weeks, and will continue so long as a part of New Zealand remains in Alert Level 3 or higher (rounded to the nearest fortnight)

 

As long as any part of NZ is above Alert Level 1 (this is a one-off payment)

 

What can it be spent on?

 

The wage subsidy must be passed through to employees

 

Must be used to cover business expenses such as wages and fixed costs (e.g. rent). While the payment is calculated with reference to employees, it does not have to be spent on employees

 

How does it apply to groups?

 

Bit complicated, but look at the revenue loss on an entity basis, unless the group has a separate employing company, then you need to suffer a 40% revenue loss across the whole commonly-owned group

 

Commonly owned groups must be down 30% across the whole group

Groups can claim on a per entity basis (i.e. up to $21,500 each) if the whole group meets the 30% revenue decline test and the individual entities also meet the 30% revenue decline test

 

Details published?

 

Yes – here: COVID-19 wage subsidies - Employer Search - Ministry of Social Development (msd.govt.nz)

 

Yes – here

 

What if the business is new?

 

The business must have traded for 14 days before 17 August 2021 to be eligible

 

Must have been in businesses for at least 6 months (this will change to 1 month with effect from 9 September)

 

Other criteria

 

Yes – there are a number of criteria, including mitigating the effects of the Alert Level change (such as using cash reserves, claiming insurance, talking to the bank) and complying with employment law (including using best endeavours to pay employees 80% of ordinary earnings)

 

Yes – the business must be considered viable and on-going

Passive income is excluded from the revenue calculations

 

Documentation

 

Applicants must prepare and retain evidence to support the declaration made

 

Records need to be prepared and kept available for Inland Revenue on request

 

Tax & GST treatment

 

Receipt of the wage subsidy is not subject to income tax (unless self-employed), but cannot claim tax deductions for employee costs funded by the wage subsidy

No GST

 

Receipt of the RSP is not subject to income tax, but cannot claim tax deductions for costs funded by the RSP

GST output tax must be returned on payments, input tax credits can be claimed when the RSP is spent

 

Interaction with other schemes

 

You cannot get more than one COVID-19 payment (wage subsidy, leave support scheme & short-term absence payment) for the same employee at the same time

 

You can be receiving leave support scheme payments, short-term absence payments or the wage subsidy at the same time as the RSP

 

 

If you meet the criteria you can claim both the wage subsidy and the resurgence support payment

 



What is available at all COVID-19 Alert Levels

Businesses are able to utilise the Leave Support Scheme when employees who cannot work from home are required to self-isolate due to potential exposure to COVID-19, or they are considered “higher risk” if they contract COVID-19 when there is active community transmission. The Leave Support Scheme provides a fortnightly payment of $1,200 or $718 respectively for a full-time or part-time employee who is isolating.

Since mid-February 2021 the Leave Support Scheme has also been supplemented by the Short-Term Absence Payment (STAP). This payment of $359 per eligible employee is available to support employees who are required to stay at home while they await the results of a COVID-19 test but are unable to work from home. The payment also applies to parents or caregivers who have dependents awaiting a test result, as well as self-employed workers.

Employers can apply for the STAP once in any thirty-day period per eligible worker (unless a health official or medical practitioner advises or requires the worker to re-test during that period). If the employee subsequently tests positive, they will be eligible for the Leave Support Scheme.

Businesses with 50 or fewer employees can be eligible to apply for a Small Business Cashflow Loan. This scheme, administered by Inland Revenue, allows certain businesses to apply for a loan of up to $100,000. The maximum value of the loan available is $10,000 plus $1,800 per full time equivalent employee. Loans are interest free for a period of up to two years (if fully repaid in that time).

If you have any questions in relation to the issues discussed above, please consult your usual Deloitte advisor.

Did you find this useful?