What Kind of Support Is Available during Omicron?

1 February 2022, the government announced another range of financial support schemes to help businesses through the Omicron outbreak. Here are the highlights of these schemes, as well as a reminder that your SBCS loan may be repayable soon, if applicable.

 

Government Support When Staff Needs to Isolate

If your employees need to isolate, either because they contracted Covid or because they’re a close contact of someone who tested positive, you’ll be able to apply for one of the support schemes to help pay for your employees’ wages. 

There are two schemes available, and for both, your employee needs to be unable to work from home.

 

1. Short-Term Absence Payment

This is a once-off payment for any employee who needs to isolate for a short period of time. The payment is $359, and can only be claimed once per employee in any 30-day period, and the money should be used to pay the employee’s wage. 

This support is available when the employee…

  • Is required to isolate while waiting for a Covid-19 test result
  • Is looking after someone who is waiting for a test result
  • Lives with someone who has been to a location of interest and must isolate while waiting for a negative test result

 

2. Leave Support Scheme

This support scheme is for staff who need to isolate for a longer period of time, and for at least 4 consecutive days. A weekly amount of $600 will be paid for full-time employees (20+ hours) and $359 for part-time employees. 

The support is available when an employee…

  • Tested positive for Covid-19, is a close contact of a positive case, has been advised to isolate due to medical reasons, or is looking after someone who needs support to self-isolate.

If your employee needs to isolate for more than 11 calendar days, you can apply for a second week’s payment, as well as further support for every seven days of self-isolation. 

Read this article for more guidance about the different requirements for businesses and who needs to self-isolate. 

 

Completing a Declaration

You will need to complete and sign a declaration should you want to apply for any of the two support schemes. You can find more details and the link to apply here: 

Short-Term Absence Payment

Leave Support Scheme 

As always, we’re here to assist you if you need help with your applications.

 

Financial Support for Businesses Struggling Because of Omicron

It was announced yesterday that the government will introduce another support payment scheme for struggling businesses. This is still fresh off the press, so we don’t have all the details yet, but here is some information: 

  • Payment would be $4,000 per business, plus $400 per full-time employee. This will be capped at 50 full-time staff, or $24,000.
  • Payments will be available fortnightly, for six weeks. In other words, there will be three payments in total available.
  • Businesses must show a 40% decrease for seven consecutive days, within the six weeks before shifting to phase two on 15 February.
  • Applications open on 28 February for the first payment.

You can find the press release here.

 

IRD Business Loan Repayment 

If you’ve taken out a loan under the COVID-19 Small Business Cashflow Scheme (SBCS) in the early days of Covid, you may need to start thinking about repayments. The loans are repayable within five years, with the first two years interest-free. If you don’t repay the loan within two years, IRD will start to charge you 3% interest. This interest will be backdated to the loan drawdown date, which means you’ll pay 3% interest on the first two years as well. 

So if you can, you may want to think about repaying the loan in full before the 2-year anniversary date. If you can’t repay the whole loan yet, you need to start making regular repayments for both the interest and principal loan. 

For more information, you can read this article. 

It was also announced yesterday that the government is going to make changes to this scheme. Although we don’t have all the details yet, this is what we could gather so far: 

  • A top-up loan to the amount of $10,000 will be available for firms that already accessed a loan previously.
  • The repayment period will be five years, with the first two years interest-free.
  • For anybody taking up an additional loan, the accrued interest for the first two years of the initial loan will be removed. Interest would only start accruing at the start of year three.

Boost Your Cash Flow During the COVID-19 Pandemic

The one thing most small and medium-sized businesses struggle with right now is cash flow. Many businesses have little or no income during Alert Levels 4 and 3, but your expenses didn’t go away, right?

Here are some of the measures introduced recently that could give you some breathing space:

  • Government interest-free cash loans
  • Cash boosting tax changes
  • ACC delayed invoicing

Scroll down for more information on each point.

As with most Covid-19-related issues, new measures are often issued in a rush and forever changing after the initial introduction. We are constantly getting more details, so stay tuned for more information coming your way.

 

Boost Your Cash Flow

Apart from the above, what else can you do to free up some cash? Here are a few actions you can take:

1. Rethink your costs: What do you really need? Are there any products or services that you can cancel?

2. Renegotiate terms: Of course, you can’t cancel everything because then you may not be able to do business anymore. So, ask yourself, are there any terms or costs that you can renegotiate?

3. Offer discounts: You can offer discounts to your clients if they pay their bills earlier. You can also offer discounts on products or services to entice more people to work with you and to move old stock.

4. Rethink your processes: How can you work more efficiently? The more efficient you are, the more money you save.

5. Review your stock holding: Can you reduce the number of stock items you hold at one time?

6. Rethink your capital expenditure: Hold off on buying new equipment if you don’t absolutely need it. Instead of buying a luxury item, consider whether a more basic item can do the same job.

7. Plan, plan, plan: There has never been a more crucial time to draw up cashflow and other forecasts. You also need timely financial reports to measure how your business is performing so that you can make tweaks and pivots quickly when needed. This is where BW Miller Dean can help. Make sure you get in touch so that we can help you to take control of your finances and safeguard your business.

 

Government Measures Introduced to Boost Your Cashflow

Government Interest-Free Cash Loans

A new loan scheme was introduced to help small and medium-sized businesses who are struggling due to revenue lost because of Covid-19.  Under this scheme, businesses who have less than 50 employees can borrow $10,000 plus $1,800 per employee, up to a maximum of $100,000. The scheme is also available to sole traders and self-employed persons.

Before you get too excited, remember that it is a loan and you will need to pay back what you borrow. Unlike previous subsidies introduced, this is only a temporary relief to help you through the worst.

Here are some of the key features:

  • The scheme is available to businesses with 50 full-time employees (or equivalent) or less.
  • The loan will be interest-free if you pay it back within one year. Otherwise, interest will be charged at 3%.
  • The maximum term is five years, but the government will not seek repayment within the first two years.
  • You can borrow $10,000 per firm plus $1,800 per employee.
  • Sole-traders can borrow a maximum of $11,800 ($10,000 basic plus $1,800).
  • You will need to meet the criteria for a viable business and you should be able to prove that your income dropped at least 30% due to Covid-19.

Applications will be open through myIR from 12 May and you have one month to apply, however, this deadline may be extended. Read more about the loan scheme here.

 

Cash Boosting Tax Changes

Here is a reminder of some of the recent tax changes introduced. These changes came into effect from 1 April 2020 and apply to the 2020-21 financial year.

  • Small assets costing less than $5,000 can be expensed immediately. This threshold increased from $500.
  • Depreciation on commercial buildings was reintroduced. If you claimed depreciation previously on the building, you have no option but to start claiming depreciation again.
  • You only need to pay provisional tax if your residual income tax is more than $5,000. Previously the threshold was $2,500.

 

ACC Invoicing Delayed until October 

The ACC usually sends out their invoices from 1 July, but for the 2020-21 year, they’ll issue their invoices only in October to give businesses some cash flow relief. Other invoices issued throughout the year will also be on hold for three months, and they’ll offer payment options once they send out invoices. Find out more here.

 

Protect the Lifeblood of Your Business

How well you have a finger on the cash flow pulse can make the difference between thriving in business and closing up shop.

There has never been a more crucial time to draw up cashflow and other forecasts. You also need timely financial reports to measure how your business is performing so that you can make tweaks and pivots quickly when needed. This is where BWMD can help. Make sure you get in touch so that we can help you to take control of your finances and safeguard your business.

Tax Payments: Separating the Myths from the Facts

As with everything relating to COVID-19, there is a whole lot of information circulating about tax payments that sounds too good to be true. And some are.

We want to clear up a few of the common misinterpretations about the recent tax reliefs announced and make sure you understand which are actually available to you so that you don’t get into trouble with the IRD.

 

Myth #1: I Don’t Have to Pay Tax at the Moment

All core taxes are still payable as due and you still need to submit your returns on time. However, the IRD has indicated that they would be more lenient with late payments.

This doesn’t give you the green light to ignore taxes altogether. If you’re in a position to pay your taxes, you should do so. If you could have paid, and you didn’t, the IRD is not going to act favourably towards you.

If you are struggling to make any tax payments, there are some options available to you. Contact us so we can discuss those options and help you work out a payment plan that best suits your cash flow and keep you off the IRD’s black book.

 

Myth #2: The IRD Won’t Charge Any Interest or Penalties If I Don’t Pay

This is partially true. The IRD has relaxed the eligibility requirements for remitting interest and penalties, but these will still be imposed automatically by the IR system.

To have these reversed, you will need to apply for remission to the IRD as soon as practicable. You will also have to jump through all the standard hoops and provide them with financial information to show that your financial difficulties, and the reason you didn’t pay, were related to COVID-19. Financial information may include bank statements, management accounts, and cash flow forecasts, and we can help you to get these together.

Read more about the remission requirements here.

 

Myth #3: I Can Get the Tax Back That I Paid in the Prior Year

You may have heard that the IRD is allowing businesses to ‘carry back losses’, or in other words, that you can get a refund for tax you paid in the prior year if you’re making a loss in the current year.

It sounds great, but it’s only partially true. As always, the devil is in the details.

The first problem with this statement is that the IRD hasn’t issued any details on how they’ll apply this rule. They promised to give us more clarity on the 27th of April.

What we do know is that, in order to claim back taxes that were paid in the 2020 year, you’ll either have to wait until your 2021 annual accounts are completed, or you’d need to do some pretty accurate forecasting to estimate your losses for 2021. This is difficult in the best of times, but even more so now with all the uncertainty around the economy. It would take a pretty good crystal ball to forecast losses for the rest of the year. If you make a claim based on an estimate, you would have to prove your loss at the end of the year once your final accounts are completed.

If you made a loss in the 2020 year, claiming back taxes that were paid in the 2019 year would be a bit easier. If that’s you, please get in touch with us about getting your 2020 accounts completed earlier so you can take advantage of this relief sooner than later.

 

Final Provisional Tax Payment for 2020

The provisional tax due on 7 May is the final instalment for the year ended 31 March 2020. The shut down didn’t happen until the end of March so many of you had a good, or normal, year in 2020. The full impact of the lockdown won’t really hit us until the 2021 tax year.

If you have made normal profits for the year ended 31 March 2020, then remember that the tax thereon is still due.

So, the question of whether or not to pay your last provisional tax payment for 2020 comes down to…

  • your cash flow situation, or
  • whether you’re pretty certain that you’ll make a loss in the 2021 year.

In either case, please reach out to us to discuss your options.

 

You Can’t Get a Refund on Taxes You Didn’t Pay

Another question we sometimes get from clients is whether they can get a tax refund, even though they never paid any taxes. When messages about tax reliefs and refunds are all over the news, it’s easy to get swept up in the excitement and forget the simple principles of how the tax system works.

Remember, the IRD can’t refund something that you never paid.

 

Summary: Assessing Your Situation

As you can see, nothing is straight-forward and what applies to one business may not be relevant to another. Here’s a quick summary of the most important points to consider when deciding whether to pay your tax now or if you should apply for a tax refund due to future losses: 

  • If you’re in a sound cash flow position and it looks promising that you’ll make a profit in the 2020 and 2021 years, pay your taxes.
  • If cash flow is tight, come talk to us about your options. We can introduce you to working through Tax Traders, a tax financing company, which gives you cheaper and more flexible payment options. Alternatively, we can help you to arrange a repayment agreement with the IRD.
  • If you made a loss in the 2020 year, but in prior years you made a profit, you can apply to the IRD to carry back your losses. Ask us to help you complete your annual accounts earlier.
  • If you expect to make a loss in the 2021 year, and you want to request that the loss is carried back to prior years, you’ll need an accurate cash flow forecast. Get in touch if you want us to help you to create a realistic forecast — we can’t see into the future, but we’re as near as you could get to a crystal ball.

 

The tax rules and interpretations are constantly changing. We’ll keep you informed of these changes via our newsletter.