Peter Vial, New Zealand Country Head for CA ANZ said the package is comprehensive and extensive. “The scale of the package’s fiscal stimulus at 4% of GDP is huge.
“The wage subsidy costed at $5.1 billion is very welcome. At $585 per week per full time employee and $350 for part time workers it is in line with the wage subsidies provided after the Christchurch and Kaikoura earthquakes.
“The key will be ease of access to the subsidy and the speed with which it can be provided to employers. Red tape cannot stand in the way of fast and easy access to the support.”
Vial said increases in benefits and in the winter energy payment will help vulnerable Kiwis, and the economy generally, given that the money is likely to be spent.
“The additional 0.5 billion for the health sector is critical given the potential scope of the virus’s effect on the community,” he said.
“Tax changes including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax will help businesses that are profitable. The tax changes will not assist taxpayers in losses.
“However, tax changes will increase cashflow and stimulate investment.”
Vial said the package is both targeted where it needs to be and broad as well. “It seems cohesive.
“The key now will be agility in both the delivery of the measures and the refinement of it as the Covid 19 situation evolves. The effectiveness of the measures needs to be monitored and new measures added where necessary.”
Chartered Accountants will play a critical role in helping their business clients access this support.
Details of the package
The wage subsidies will be available for businesses in all sectors and all regions that can show a 30 per cent decline in revenue for any month between January and June 2020 compared to the year before (including projected revenue). If eligible, employers would be paid $585.80 per week for full time staff, and $350 for part time. Payments are capped at $150,000 per business. They will be paid in a lump sum. The support will be available for twelve weeks with applications open today. Businesses must have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank) and signed a declaration form to that effect. Estimated total cost: $5.1 billion.
Income support package
This package includes:
- A $25 per week increase for all main benefits from April 1 2020. MSD estimates that this will increase the incomes of approximately 350,000 low income families. This will also help as more people who have previously been in work are likely to need income support in the coming months, and act as a stimulus.
- The Winter Energy Payment for 2020 will be doubled to $1400 for couples and $900 for single people. It is estimated that around 850,000 recipients will benefit from this change. Once we include the partners of recipients, more than one million people are expected to benefit.
- Removing the hours test from the In Work Tax Credit to assist those who may face variable hours. Estimated total cost: $2.8 billion
Waiving interest on some late tax payments
Interest is usually payable by taxpayers when they pay their tax late. The Commissioner of Inland Revenue will be given a time-limited discretion to remit interest if a taxpayer’s ability to make a tax payment on time has been significantly adversely affected by the COVID-19 outbreak. This measure will provide targeted relief to directly affected taxpayers facing cashflow pressures and apply for all tax payments due on or after 14 February 2020.
Immediate deductions for low value assets
Immediate expensing allows businesses to fully deduct the cost of low-cost assets when they are purchased, with the threshold for the write-off currently at $500. We are putting in place a temporary increase in the threshold to $5,000 for one year, reverting to $1,000 in the longer term (still higher than the current $500 threshold), which will reduce compliance costs for businesses. It will also have the side-benefit of stimulating business purchases. Estimated total cost: $667 million.
Support for large or complex businesses
Some businesses may fall outside the scope of the proposed business and employee support package (including working capital support), such as large or complex businesses. Officials have been asked to develop options so the Government can support larger businesses that have been materially impacted by COVID-19, where other avenues for support are not available, and the businesses are commercially viable over the longer-term. Any support would seek to mitigate the economic impact as adjustment occurs.
Working capital support for small and medium sized businesses
Officials are meeting with banks to discuss the potential for future working capital support, including in the form of loan guarantees for businesses that face temporary credit constraints.
The COVID-19 Cabinet Committee will discuss a package of measures to support the aviation sector and the protection of supply chains. This does not include any Government support for Air New Zealand. The estimated cost of this package is $600 million.
CA ANZ has collated some essential weblinks and resources including information on its impact on workplaces and businesses.Read More