How to best prepare for COVID-19 impacting your business
The virus has spread across the globe and as we head into winter, we are likely to see it spread further in New Zealand. However, the government has taken proactive steps to protect our health in terms of international travel and group gathering restrictions, unfortunately this has led to economic uncertainty and panic amongst consumers.
In what ways should we be prepared?
Firstly, contact your bank:
New Zealand Bankers’ Association and the Reserve Bank of New Zealand are ready to respond. Most of us have mortgages, business loans and if not, you may be able to access short term funding i.e. overdrafts, line of credits etc. if and when needed. It is important to have contingency plans in place to avoid cash flow issues. Depending on your circumstance’s banks are willing to reduce or suspend principal payments on your loans, restructure business loans, consolidate loans. Another option to discuss with your bank is how you can take advantage of the lowest interest rates available; most banks have already passed on the OCR rate cut to their floating interest rate customers.
Secondly, know what the government can do for you:
The Economic Response Package (as announced on 17 March 2020), is designed to help cushion the impact of COVID-19 on small to medium sized businesses.
Wage subsidy scheme:
Wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to all businesses, including sole traders and the self-employed.
The subsidy will be $585.80 per week for a full-time employee (20 hrs or more) or $350.00 per week for a part time employee (less than 20 hrs). The payment will be made as a lump sum for a period covering 12 weeks. This means employers will receive a payment of $7,029.60 for a full-time employee and $4,200 for a part time employee. The maximum amount any one employer can receive is $150,000.
Requirements:
If you have suffered a 30% decrease in turnover (or are projected to) month vs same month last year for the period of (January 2020 – June 2020).
Employers will need to declare that, on their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period. This is the equivalent of keeping people working 4 out of 5 days of the week.
Employers must also have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank/financial advisor) and sign a declaration form to that effect.
This subsidy is great for employees whose wages gross to $585.80 (or $350 for part time employees) but you may need help in covering the gap for those employees who depend on larger amounts than that. Get in touch with us to see where you can cut costs to cover the wage of those essential employees whilst your turnover struggles.
Leave and self-isolation support:
Workers and businesses have responsibilities to prevent the spread of COVID-19. The purpose of the COVID-19 leaves and self-isolation scheme is to support workers financially to self-isolate, or while ill with COVID-19, where this is required so that all businesses and workers can do the right thing.
From 17 March 2020, the COVID-19 Leave Payment will be available to support people financially if they need to self-isolate, cannot work because they are sick with COVID-19 or cannot work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19.
The payments will be $585.80 per week for full time and $350 per week for part time workers. The COVID-19 Leave Payment will be available for eight weeks from 17 March 2020. Employers will be able to apply for this more than once.
Business cash flow and tax measures:
There are a number of business cash flow and tax measures that have been announced, including:
Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by COVID-19.
Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/2021.
Increasing the small asset depreciation threshold from $500 to $1,000 — and to $5,000 for the 2020/21 tax year.
Allowing depreciation on commercial and industrial buildings from 2020/2021.
Removing the hours test from the In-Work Tax Credit (IWTC) from 1 July 2020.
The changes in tax policy are designed to provide tax relief and incentivise businesses to continue to spend on infrastructure and their growth during these tough times. We will be reviewing how these changes are likely to impact your tax position and will get in touch soon if needed.
Existing tax debt:
If you are currently struggling due to COVID-19 please contact us now; we have numerous ways open to us to provide tax relief, ranging from remittance of interest & penalties, revising provisional tax requirements to arranging payment terms with Inland Revenue.
Thirdly talk to your Employees:
Plan for the worst, hope for the best. The situation we are faced with is largely unprecedented, its really important you communicate with your employees now on their future roles, hours etc if the worst scenario i.e. public lockdowns like we are seeing throughout the world were to happen.
Employment New Zealand has some great resources and guidance on how to handle employee expectations.
Contact your regional labour market manager from work and income if redundancy is required due to the pandemic.
Northland: Darrell Lambert Darrel.Lambert008@msd.govt.nz
Auckland: Flo Samuels Flo.Samuels005@msd.govt.nz
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Lastly and most importantly:
DON’T PANIC.
As with all other adverse situations, this too will pass. The reason why we plan is to be prepared, and with our help we aim for you to be prepared for the worst outcome. So, get in touch with us to see how a COVID-19 resistance plan can help you and your business avoid the worst of the situation.
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