Businesses now need to have suffered a smaller revenue decline to be eligible for the extended wage subsidy; Businesses have more time to apply for an interest free IRD loan

Businesses now need to have suffered a smaller revenue decline to be eligible for the extended wage subsidy; Businesses have more time to apply for an interest free IRD loan
Grant Robertson. Getty Images.

The Government is tweaking the eligibility criteria for the extended wage subsidy so more businesses qualify.

Under new rules announced by Finance Minister Grant Robertson on Friday, businesses could be eligible for an eight-week extension to the 12-week wage subsidy if they’ve suffered a 40% revenue loss. Previously, the threshold for the extended subsidy was 50%.

The window of time in which businesses need to have suffered this loss has also been changed. They now need to have suffered a 40% loss in a 30-day period in the 40 days prior to applying (previously it was 30 days), versus the comparable period last year. This window must begin after May 10 (the extended subsidy is available from June 10).

The Government expects the changes to mean an additional 40,000 businesses will be eligible for the extended wage subsidy.

It expects the cost to taxpayers to increase to between $2.6 billion and $3.9 billion. The top estimate under the previous extended wage subsidy criteria was $3.2 billion.

The wage subsidy has paid out $11 billion to date, covering 1.66 million jobs.

Separately, the Government has announced it’s extending the deadline for Small Business Cashflow Loan Scheme applications from July 12 to July 24.

The Inland Revenue has distributed more than $1.18 billion of unsecured loans to 70,000 small businesses under this scheme to date.

Here’s a press release from the Government:

The Government is today announcing further support for businesses that continue to be affected by the global COVID-19 pandemic, as the broader economy becomes one of the most open in the world following the success of New Zealand’s public health efforts.

A change in criteria for the extended wage subsidy scheme means an extra 40,000 businesses will be eligible. After feedback from businesses, the Government has taken the decision to change the required revenue drop threshold from 50% to 40%. Up to 230,000 businesses are now forecast be eligible for the new 8-week scheme from 10 June, covering up to 910,000 workers.

Small businesses are also being given more time to apply for the Small Business Cashflow Loan Scheme, with the application date being extended from 12 June to 24 July.

Finance Minister Grant Robertson said the changes show the Government is working with the business community to put considerable support in place to protect jobs and incomes during the 1-in-100 year global economic shock caused by COVID-19.

“We moved quickly to put the wage subsidy in place to cushion the blow. We’ve also shown we will move quickly to make changes so support is targeted to where it is needed most, based on feedback from our regular engagement with the business community.

“While many New Zealanders are now back at work and our economy is one of the most open in the world, there are businesses that will feel the impact of this global pandemic for longer. The tourism, retail and hospitality sectors will in particular be supported by the extended wage subsidy and cashflow support.”

Carmel Sepuloni said the wage subsidy was successfully protecting jobs and giving businesses the ability to stay connected to their workers as the economy reopened. The scheme has paid out $10.997 billion to date, covering 1.66 million jobs.

“Nearly two thirds of businesses surveyed said the wage subsidy meant they were better able to use other cashflow for non-staff overheads, like commercial rent. About 89% said the wage subsidy will help them keep operating for the foreseeable future, while only 6% of those surveyed have indicated they are considering redundancies in the next few months.”

Stuart Nash said the extension to the Small Business Cashflow Loan Scheme recognised that many businesses were still planning for the future as the economy opened up more quickly than expected following the success of New Zealand’s public health response.

“The high level of demand we’ve seen for these interest-free loans to date shows we made the right decision to support SMEs with direct lending from the Government, through IRD. Extending the application date will give business owners the confidence that support is available if needed as the economy opens up.”

To date, more than $1.18 billion has been disbursed to more than 70,000 small businesses under the cashflow scheme. The loans are interest-free if repaid within a year. Businesses have five years to pay the loans off, with no repayments required during the first two years.

The changes to the extended wage subsidy scheme mean it is now forecast to provide between $2.6 billion and $3.9 billion of support to businesses to help them with their wage bills, up from a top estimate of $3.2 billion under the old threshold. This will be funded through the COVID Response and Recovery Fund.

The Government has also amended the revenue test under the extended scheme so that the business must have a revenue loss of at least 40% for a 30-day period in the 40 days immediately prior to the application date (but beginning no earlier than 10 May 2020) versus the nearest comparable period last year.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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46 Comments

As I keep saying, this is basically a UBI. It's just going to go to more and more people, they just need to figure out how to fund it.

RBNZ will just chuck a little oil on the printing press bearings so she can purr indefinitely

*brrr indefinitely

I don't think I agree. This is about keeping people in jobs and giving business's time to build their cash flows (revenue) back up. It is trying to recognise that some of the effects of the COVID lock down will be delayed. It will be a life saver for many but for others it will just delay the inevitable.

Yes, I imagine it will have a high take-up and if it does it will support the intentions you imagine it to have. We'll see - but like you I think many businesses need more time to build their businesses back up.

Yep and hopefully buys them time to fiqure out and get a plan in place in case they do loose there job at the end, get the house in order so to speak. It is also buying the government time to work out how to create all these jobs in the greenspace and infrastructure while that runs down in the background.

I guess the argument is whether the wage subsidy was for the acute economic problems caused by the lockdowns or the chronic problem of weaker economies all over. The answer to this should be straight forward - compare the lockdown period to the period of time the wage subsidy is running for. If the two are not equal, it shows the government is prepared to provide wages beyond the cost of the lockdown. This means they are giving money due to the chronic problem, not the acute problem. And if they are giving money to try and solve the chronic problem of general economic weakness, then they are now providing a SBI (selective basic income), propping up companies that should be failing under "the new normal".

So the government has to choose - does it continue to prop up those that are failing by giving basic wages via companies run by people who have the potential to abuse it... or just start funding those workers directly. Well - we got our answer when it started to provide a $490 weekly income to those who recently lost their jobs due to Covid, but didn't up the payments of long term unemployed.

So if you lose your job, you receive the SBI... which will likely need to now go on until the end of the Covid crisis... which will basically be years. People will start complaining about being fair etc with the new SBI, so they will eventually have to extend to the long term unemployed and Superannuitants too. That $490 is significantly more than Super etc, so it may need to be revised down.

Before long we have a UBI...

Yes, let's hope the $490 is extended to all - but it doesn't need to be a UBI, it could be a GBI - guaranteed basic income.

https://www.stuff.co.nz/national/politics/121727777/pm-jacinda-arderns-s...

Nah, if a business can’t operate in level 1 then it’s screwed. The subsidies should stop then. Otherwise we’ll be effectively propping up tourism based businesses until the whole world is vaccinated which could be years away.

This is far from a universal basic income, for that to work it needs to be... yes, universal. But who knows maybe this is a useful step towards achieving it and replacing the broken welfare system.

If the government universally gave $585 a week it would cost $152 billion per year.

17
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Why not be honest and just give the money directly to landlords?

Think you'll find this subsidy is greater than what is spent on the accommodation supplement, but take your point rents are way too high for the wages paid in this country.

FB, that's a very ignorant comment, the wage subsidy does not go to tenants or landlords, it much as its name suggests, goes to the employees. Some employees are renters some are home owners but the subsidy has nothing to do with landlords. What the employees do with their wages is a separate issue.

15
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Sounds like something a landlord would say?

No just a fair summary of what it is. Now the accomodation supplement is another issue.......?

16
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On a macro level, if the wage subsidies were not paid, rents would not be paid, landlords would have to sell, house prices would come down. The subsidy is 100% propping up landlords and therefore the housing market. The government knows what its doing but thinks we are too dumb to see it.

Do you ever say anything that is not related to housing??? The world has going through a pandemic and people have lost livelihoods through no fault of their own or any bad decisions they made. Without these subsidies more people will lose jobs and their families and children suffer. Give it a break and stop your dumb comments linking wage subsidies to landlords.

You should move to the US. Houses are much cheaper there.

I am not sure this will be as beneficial as it seems. Most businesses would have suffered their greatest revenue drops MAR-APR during the full lockdown. That would have been the basis of many applications for the round 1 subsidy and eventually for round 2 which was reported initially to have the criteria of actual 50% revenue drop for the comparable 30 day period last year. Now for round 2 businesses will need to prove at least 40% loss for 30 day period from only May 10 onwards. Monday, June 8th will be 1st 30 days. NZ went to level 2 from 14th May. Many businesses would have had a sales bump since level 4 due to pent up demand and a desire from Kiwi's to support them. They may not qualify now. The imminent move to level 1 may only push revenues higher in the short term.

That depends, the Field Days trading window is now gone, for a lot of companies that surge in activity was a big driver in cash reserves for use later in the year. Year-on-year, many businesses are looking at a quieter June/July period than usual.

So less companies are in the shitter you reckon. That's a good thing.

You get paid on the 20th of the following month. Jeez the ignorance. For most anything except retail, no one has been paid since April. And April was thin, because late March work was effected by lockdown.

Maybe my business is unusual. But last month for us was 60% up on the previous year, and ytd we are just about back on an even footing with last year after a 0 sales in april. We are wholesalers selling to retail and trades.
I'm still pessimistic, there is no way we will be claiming the next 8 weeks.

Under the revised subsidy scheme. What happened prior to May 10th doesn't matter. No matter how deep the hole it created for your business. You need to prove that revenue is down 40% for a 30 day period from May 10th onwards. Compared with the same 30 day period last year. Revenue happens when you make the sale or raise the invoice. If you choose to offer your customer credit. The revenue is still booked when you raise the invoice. Regardless of when they actually pay you. Look at the latest paymark dashboard data https://www.paymark.co.nz/consumer-spend/ . Yes it's only retail eftpos spending on goods and services. But that is what drives the domestic economy and it is not as bad as you might think. I bet the government is looking at this data.

13
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Cheaper to just let housing market correct than play this game.

Never mind that many businesses have finished laying off numerous staff, revenue has declined the required % but they are in profit due to cost savings. Everyone in NZ is now sucking of the govt teat in one way or another. My god these socialists just love spending other people’s cash.

Utterly bonkers.

Well, it's not "govt teat" and not "other people's cash": people are getting back (a small portion of) their own money that was taken off them as tax in the first place.

But that money was spent on things which benefit you already. You know the government provides essential services right?

This money is all debt which we are borrowing from our future productivity.

I’m not. My tax money is being given to everyone other than me.

"Everyone in NZ is now sucking of the govt teat in one way or another."

Nope. Stop generalising. Husband worked right through at home instead of in an office, but complained about crappy broadband (and kids watching Netflix whilst people were trying to work). His employer did not go for any subsidy that I am aware of. Whilst I had my fulltime contract end on the Friday of the week that we all went into house arrest.

So no, we're not sucking on the govt teat as we have no kids, nor are we elderly or infirm. We're part of that dying portion of society called 'actual taxpayers'.

You can have kids and not suck on the govt teat.

10
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Here's the answer!
Get the Government to provide a Stand-By Loan Facility of $900 million; suspend dividend payments to your shareholders; sack 4,000 of your staff and cut the wages of the lower echelons; withhold refunds in cash to your loyal customers; advise that you are going to sack even more staff, all while refusing to drawdown the Government support measures specifically advanced to avoid some of the aforementioned actions
The result? Your share price doubles in 8 weeks.
The System working at it very best.........
https://www.stuff.co.nz/business/industries/121712064/coronavirus-anger-...

Yep, that's what happens when the government thinks it knows best so steps in with massive distortions. It doesn't pan out as they wanted and the shareholders get rich.

Wow, who could have seen that coming? (maybe they should look at the last 10 years)

I note that this covers more than 35% of the workforce (910k out of 2.5m workforce), a scary number, but also seems to suggest that with the addition of those on COVID job loss payment and Job seeker benefits (346k as at May 7) that close to 50% of the workforce will be paid for by the government right up to the election.
Really?

just long enough to get through -- no longer -- they will all stop then -- quite simple we cant borrow 5 bill a week for ever -

surely by now there should be some better criteria in place -- such as -- businesses must show how receiving the subsidy will allow it to get back to operating without one within the 8 weeks -- or else its not eligible

this is just kicking another can down the street and hiding the reality of how many jobs are already lost - if revenue is goign to be down 40%+ in the next three months - there is no real chance of that business in 8 weeks time suddenly being close to 100% and retaining all employees on full hours -

Bull. Most businesses get paid for the work they do in the following month on the 20th. March was a thin month because the lockdown started. Only 3 weeks work accomplished. So April 20th income was down. May 20th was zilch. (Accept for the late payers) June 20th will be a sorry day as well as getting back into work in May was slow and limited. But most businesses should be in the full swing of things now, for a decent July 20th payday. That is the reality for a lot of businesses.

There Is a 'better criterion', kpnuts. It's called Buying an Election. But it simply Cannot be said aloud......

All I can say is ............its bloody confusing .

The Government is not articulating this one clearly at all .

He's some advice , policy should never be mad on the fly , and changes to existing policy should be more rationally thought through and sense -tested before being wheeled out to us , so that variations to it are unnecessary

I agree. Constant changing of dates, percentages of loss. Subsidy not taxed, then taxed. Businesses need certainty. See whats available. Make a plan. Move forward. Oh rules change. Plan out the window. Start again. Last thing we need.

As a business owner its a welcome breather. Nobody is expecting to go back to business as usual , its a chance to adapt to the new climate. Many small businesses have no or limited website exposure and online ordering systems. The lockdown has shown you need some kind of internet exposure , habits have changed , and i doubt many can survive without upgrading their technology. So even businesses that are busy are finding extra costs and time required, some of those will reduce , some will stay or even increase as the new "normal ".

Must.... hide.....the.....economic.......destruction

Until it comes to pay back all the money through future tax...

They meet, they talk, they meet, they talk more, they meet again & still more talk. Where's the work? Where's the future of NZ Inc in all of this? Have they heard of working? You know, where people create stuff & add value to other stuff & create wealth so we can afford to pay all the dead heads on the dole & the teenagers having babies. Does this govt have any aspirations at all?

Oh, yes, the core Aspiration is to Get Back In come Sept 19th....all else is subservient to, and conditional upon, That.....

"where people create stuff & add value to other stuff & create wealth.."

to sell to who?
theres your problem

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