Omicron Business Support Scheme
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.
New SBCS borrowers, and those that have already paid back their loan in full before 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.
COVID-19 Support Payment introduced
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.
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.
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.
Recently acquired businesses
Businesses that changed ownership after 16 January 2022 may be able to apply for a CSP.
To get a CSP, the business:
- needs to meet the CSP criteria.
- must have been operating for at least 1 month before 16 February 2022.
- activity must remain largely the same as before the change in ownership.
Pre-revenue businesses or organisations
If your business or organisation has taken active steps towards being market ready but has not yet begun trading, you may be eligible for the CSP. A pre-revenue business or organisation may be eligible if both of the following apply.
They have had a minimum 40% drop in their ability to raise capital over a 7-day affected revenue period (7 days in a row) as a result of 1 or more COVID-19 circumstances.
They meet the other CSP eligibility criteria.
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 their myIR account at ird.govt.nz
They should select the 'I want to' link, then 'Request an instalment arrangement'. They should also tick the box to say their business has been affected by COVID-19. Doing this confirms that a customer is letting Inland Revenue know as soon as they reasonably can that they cannot pay on time because they are adversely affected by COVID-19. It also confirms they will pay the original amount as soon as they reasonably can.
If the schedule of payments they propose 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, the customer will be charged interest for any outstanding amount from the original due date.
If a customer is not able to set up a reasonable payment plan or keep to the terms of the one they set up, they 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 customer’s 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.
Consultation on deductibility of costs incurred due to COVID-19
Inland Revenue has released a draft interpretation statement for consultation. This statement considers whether a business may claim an income tax deduction for costs it incurs due to the COVID-19 pandemic.
The statement PUB00432: Income Tax – deductibility of costs incurred due to COVID-19 is available to view on the Inland Revenue Tax Technical site at taxtechnical.ird.govt.nz/consultations/draft-items
Please email your comments to Public.Consultation@ird.govt.nz
The deadline for feedback is 30 March 2022.
COVID-19 response variations
We are reconsidering all the variation decisions made under sections 6H and 6I of the Tax Administration Act 1994 (TAA) to determine which ones should be reissued. We are also going through the same process for any other decisions taken under the Commissioner's duty of care and management power in section 6A of the TAA.