Government Subsidies March 2022
The Government has announced 3 additional forms of financial support for businesses with cashflow pressures as a result of COVID-19. These are:
• an increase to the base Small Business Cashflow Scheme (SBCS) and the ability to borrow a top-up if they did not borrow the full amount
• up to 3 COVID-19 Support Payments (CSP)
• an extension of IR’s ability to remit penalties and interest.
Small Business Cashflow Scheme (SBCS) changes
The following changes will be made to the SBCS before the end of March.
Base loan amount increased:
The SBCS base loan will be increased to $20,000 (from $10,000). This means the amount that can be borrowed will be $20,000, plus $1,800 per full-time equivalent employee (up to 50 employees). The loan repayment period remains 5 years (60 months).
Interest free period:
The first 2 years of existing loans will become interest-free provided the loan is not in default. Interest will apply at a rate of 3% per year on the remaining loan balance from the first day of the third year of the loan period.
Existing borrowers can get a top up loan:
Existing borrowers who already have a loan (and have not defaulted on this loan) will be able to apply for a top-up loan. They can borrow an additional $10,000 plus any amount they did not borrow in their initial loan. The top up loan can be drawn down as a lump-sum or as up to 4 smaller instalments over time before the end of the scheme on 31 December 2023.
A borrower who receives a top-up loan will have 2 separate loans, each with their own 5-year loan term and 2-year interest-free period. For example:
• first SBCS loan - interest-free for 2 years from the date the original loan was made available to them
• top-up loan - interest-free for 2 years from the date of the first draw down. Any additional draw downs after this will not start a new interest-free period. Important message for intermediaries.
Any new SBCS borrowers, and those that have already paid back their loan in full before the required date of 31 December 2023, can borrow up to the new maximum amount as a lump sum or as up to 4 instalments before the end of the scheme. The first 2 years of the loan will be interest-free from the date the loan is made available to them (further draw downs do not start a new interest-free period).
Applying for the SBCS
The SCBS is open till 31 December 2023.
New financial support for businesses affected by Omicron
On 21 February 2022, a new targeted COVID-19 Support Payment (CSP) was announced for businesses struggling with revenue during the Omicron outbreak.
The CSP is a payment to help support viable and ongoing businesses or organisations which have experienced a 40% or more drop in revenue as a result of 1 or more of the following COVID-19 circumstances:
• the widespread presence of COVID-19 in the New Zealand community
• the legislative public health measures taken in order to reduce the spread of COVID-19 in the New Zealand community
• any business circumstances that are, or are reasonably likely to be, a consequence of the circumstances described above.
Three fortnightly CSPs will be available with applications opening for the first payment at 8am on 28 February 2022 for the period starting from 16 February 2022.
The Minister announced over the weekend, there will now be two time periods against which you can compare your current revenue to be eligible for the payment. The original period announced on Monday (5 January 2022 to 15 February 2022) and an alternative option of 5 January 2021 to 15 February 2021. The alternative option covers a period when all of New Zealand was at Alert Level 1.
Each CSP will be $4,000 per business plus $400 per full-time employee (FTE), capped at 50 FTEs or $24,000.
The maximum size of the CSP your business or organisation may be eligible to apply for, depends on the number of FTEs you have, and your level of revenue. Businesses or organisations with low revenue will have their payment capped at 8 times their actual decline in revenue.
To be eligible for the CSP a business or organisation must:
• have experienced the revenue decline of 40% or more as a result of 1 or more COVID-19 circumstances (as detailed above)
• have been operating the business or organisation for a period of at least 1 month before 16 February 2022 - if you have acquired a business or organisation after 16 January 2022, you may still be eligible for the CSP
• have taken all reasonably practicable steps (if any) to minimise revenue losses
• been operating in compliance with the COVID-19 Vaccine Certificate requirements (pursuant to COVID-19 Public Health Response (Protection Framework) Order 2021), for both the comparator period and the affected revenue period
• not have received, have an application pending for, or apply for or receive in future, a grant under the Cultural Sector Emergency Relief Fund: Grant for Self- Employed Individuals administered by Manatū Taonga - Ministry for Culture and Heritage (further details on this will be provided soon)
• be living, or (if a non-natural person) registered or otherwise established in New Zealand.
Drop in revenue
Businesses and organisations need to measure their revenue over a period of 7 consecutive days in the affected revenue period where the business or organisation has had a drop in revenue due to the COVID-19 circumstances detailed above.
To get the first payment you will need to show income is 40% lower in a 7-day period any time from February 16, compared to a typical 7-day period between 5 January 2022 and 15 February 2022 or an alternative option of 5 January 2021 to 15 February 2021.
The dates of the affected revenue period for the second and third payments are still to be decided.
The affected revenue period and the comparison period must be calculated based on what has happened, not a forecast of what might happen. If the revenue drop you have calculated is 40% or more, you may be eligible for CSP.
If your business or organisation is part of a commonly owned group, the 40% revenue drop needs to be satisfied by you and by the group as a whole.
Businesses or organisations with highly seasonal revenue may still be able apply for the CSP. Further details for businesses with seasonal revenue will be provided soon.
If you're a GST-registered businesses, you will have to return GST on the CSP payment(s). You can also claim GST for items you paid for out of the payments you got under the CSP.
Applications are made in myIR. Once you've logged in, select the "I want to..."and" tab and 'Apply for COVID-19 support payment' under COVID-19 support. Follow the instructions on screen to complete your application, including selecting the payment (and) period you are applying for.
When applying for subsequent payments go to the COVID-19 Support payment on your summary tab and select “Apply for COVID-19 Support”
Remittance of penalties and interest
Inland Revenue’s ability to remit interest if a business is late paying its tax because they are adversely affected by COVID-19 has been extended. Customers should contact Inland Revenue as soon as they know they will not be able to pay their tax on time.
Penalties and interest can be remitted for tax payments due on or after 14 February 2020 up until 24 March 2022 (including provisional tax). This will soon be extended to 7 April 2024.The best way for customers to take advantage of this is to set up an instalment arrangement in your myIR account at ird.govt.nz
Select the 'I want to' link, then 'Request an instalment arrangement'. Also tick the box to say your business has been affected by COVID-19. Doing this confirms that you are letting Inland Revenue know as soon as they reasonably can that you cannot pay on time because you are adversely affected by COVID-19. It also confirms you will pay the original amount as soon as they reasonably can.
If the schedule of payments proposed is reasonable, it will be accepted automatically.
To reduce interest charges, the original amount must be paid in full by 7 April 2024. If it is not, you will be charged interest for any outstanding amount from the original due date.
If a reasonable payment plan is not set up or the terms of the one they set up not kept to, you should discuss this with Inland Revenue. It may be possible to renegotiate the payment terms, delay the start of a payment plan to a later date, or write off a part of the tax.
Inland Revenue may check the declaration that their business was significantly affected by COVID-19. Businesses should keep records such as bank and credit card statements, management accounts, and debtor and creditor lists.
If you have any questions or concerns for us, please don’t hesitate to get in touch with us.
THE TAEL SOLUTIONS TEAM