COVID-19 Updates – October 2021
Tax Alert - October 2021
By Robyn Walker
As the COVID-19 response reaches its 19th month in New Zealand, various forms of business support continue. In this article we provide a stocktake of what is available.
Business Support Payments
The Wage Subsidy
The August 2021 Wage Subsidy has reached its fourth fortnight of support for employers. The Wage Subsidy continues to provide payments to the self-employed and employers who have suffering a 40% or greater loss of revenue as a consequence of Alert Levels 3 and 4. The revenue test period for the fourth round of the Wage Subsidy is 28 September 2021 to 11 October 2021. Applications for the fourth round of the Wage Subsidy remain open until 11:59pm, 14 October 2021.
The eligibility criteria remain consistent with prior schemes with a key factor being now that businesses located in areas which are at Alert Level 2 need to establish how their revenue loss is connected to parts of New Zealand being at Alert Level 3 or higher. If part of New Zealand moves either up or down the Alert Level 2 - 3 boundary during a Wage Subsidy period, impacted businesses can just assess their total revenue loss rather than needing to segregate the causes of the revenue loss between different Alert Levels. For the fourth round of the Wage Subsidy, this means that Waikato businesses who have moved to Alert Level 3 are eligible to apply even though part of the revenue loss period was spent at Alert Level 2.
The Wage Subsidy will continue for each fortnight part of New Zealand remains at Alert 3 or higher, with a fifth round of the Wage Subsidy already confirmed. For more information about the Wage Subsidy, please refer to our earlier articles:
Wage Subsidy criteria become harder to meet as time goes on
Objective and subjective considerations in relation to the Wage Subsidy
Leave Support Scheme and Short-Term Absence Payment
Administered by the Ministry of Social Development, the Leave Support Scheme and Short-Term Absence Payments are available for businesses to support their employees regardless of what Alert Level applies within New Zealand.
The Leave Support Scheme provides a lump sum payment to support employees who are unable to work from home and are required to self-isolate for up to 14-days due to a potential exposure to COVID-19, or they are considered “higher risk” if they contract COVID-19 when there is active community transmission.
The Short-Term Absence Payment provides a lump sum payment which effectively covers a couple of days leave when employees are required to stay at home while awaiting the outcome of a COVID-19 test and the employee cannot work from home.
The Resurgence Support Payment
The Resurgence Support Payment (RSP) is a lump sum payment available to businesses to assist in meeting costs while any part of New Zealand is at Alert Level 2 or higher. To date the Government has confirmed four rounds of the RSP will be available as part of the current outbreak. Applications for the third round of the RSP open on 8 October 2021 through the Inland Revenue website. Subject to Alert Levels, a fourth round of the RSP will open three weeks later.
Small Business Cashflow Loan
A potentially interest-free loan (if repaid within 2 years) is available to viable businesses with 50 or fewer full-time equivalent employees. The Small Business Cashflow Loan Scheme is administered by Inland Revenue.
For more information about the Resurgence Support Payment, Leave Support Scheme, Short-Term Absence Payment and Small Business Cashflow Loan Scheme please refer to our earlier article:
COVID-19: What government support is available for businesses?
Recent Tax Developments
In 2020 a power was introduced to allow the Commissioner of Inland Revenue (Commissioner) to vary due dates or other requirements, when compliance with those requirements become impossible, impractical, or unreasonable in the context of COVID-19. This power was due to expire on 30 September 2021, however on 30 August 2021, the Tax Administration (COVID-19 Response Variations) Order 2021 was made extending the powers to 1 October 2022.
The most recent use of the Commissioner’s variation power took place on 30 September 2021, when Inland Revenue released variation determination COV 21/03 - Variation of section 15D(2) of the Goods and Services Tax Act 1985 for applications to change a GST taxable period. The variation applies to a registered person who wishes to change from a 6-month to a 1-month taxable period, and for a 6-month taxable period commencing between 1 April 2021 and 31 March 2022. All previous COVID-19 variations are available here.
The Taxation (Annual Rates for 2021-22, GST, and Remedial Matters) Bill (the Bill) contains a proposal to expand some of the COVID-19 use-of-money concessions discussed in our previous article. Once enacted, it will be possible for use-of-money concessions to be targeted towards specific groups of taxpayers rather than all taxpayers.
The Bill also contains proposals to extend out the time period that Government agencies are able to share data between themselves for COVID-19 related initiatives. Originally information sharing was to be constrained to a 24-month period, but will become open-ended. Presumably the extended time-period will help facilitate the Minister of Social Development undertaking reviews of Wage Subsidy applications in the years to come.
Other Tax Support to be aware of
While not new developments, its worth reminding readers that a number of tax changes have been made since the beginning of the COVID-19 outbreak in New Zealand, some of which may still be of relevance. Three major developments to be aware of are:
- A loss carry back rule still exists, so businesses who have now determined they have ended in a tax loss position in the 2021 income year will have the option to carry that loss back to the 2020 income year to obtain a refund of previous tax paid. You can read more about these rules here.
- The new business continuity test exists to allow businesses which are in a tax loss position to carry forward tax losses when there is a change in shareholding. You can read more about these rules here.
- Depreciation on non-residential buildings was reinstated for the 2021 income year onwards. As businesses prepare tax returns for this year they should ensure they are claiming this depreciation deduction. You can read more about these rules here.
For more information about any of these topics, please contact your usual Deloitte advisor.
October 2021 Tax Alert contents
- Something for everyone in the new tax bill
- GST reforms: GST is moving into the digital age and other remedials proposed
- Property tax details revealed
- Tax rules are catching up with cryptoassets
- New FBT rate option announced – but how helpful is it?
- COVID-19 Updates – October 2021
- Tax Governance: Inland Revenue’s latest compliance campaign
- Economic income and tax on a collision course? Inland Revenue’s effective tax rate project is about to start
- IBOR reform - time to check the tax impact
- Snapshot of recent developments