The Government is providing a new round of financial support for businesses affected by Covid-19.
Struggling businesses will be able to apply to receive a new payment, top up loans they may have taken out from Inland Revenue, and pay tax more flexibly.
Covid Support Payment
The Government is offering to pay businesses up to $84,000 each over six weeks, depending on how hard they’ve been hit by Covid-19 and how many people they employ, via a new Covid Support Payment.
To be eligible, businesses need to prove they’ve suffered a revenue drop of at least 40% for seven consecutive days within the six weeks prior to February 15, when the country shifted to Phase 2 of the Omicron response.
They will be able to receive up to three payments over six weeks. Each payment will be worth $4000, plus $400 per fulltime employee up to a maximum of 50 employees or $24,000.
Applications for the first payment open on February 28 and payments will start on March 1.
Finance Minister Grant Robertson said, “It will be available on a fortnightly basis for six weeks - so three payments in total. This reflects the international experience that the peak of the Omicron outbreak should pass after about six weeks. We will continue to closely monitor the situation and have the option to extend the payment if this if necessary…
“We looked closely at whether we could offer sector specific packages but the definition of who is in what sector, and the need for cashflow to be provided quickly meant that was not a feasible option to reach the most affected.”
Robertson said the Treasury estimates each payment will cost the Crown between $160 million and $260 million. So that's between $480 million and $780 million all up.
By way of context, businesses have received around $22 billion in government support via direct payments like the wage subsidy and Covid-19 support payments since the start of the pandemic.
Small Business Cashflow Loan Scheme top-up
Businesses that have used the Small Business Cashflow Loan Scheme to get loans direct from the government will also be able to top these up.
Firms will be able to draw down an additional $10,000, with a new repayment period of five years. The first two years will be interest free.
Secondly, Cabinet has agreed to remove the first two years of accrued base interest from all borrowers who have, or will, take out a loan under the scheme.
"This change will mean interest will only start accruing at the beginning of year three,” Revenue Minister David Parker explained.
There are a number of terms and conditions related to the scheme. To be eligible, businesses need to have suffered a fall in revenue. Loan size is also contingent on business size.
The most a firm can borrow is $100,000, plus the new $10,000 top-up.
To date, 119,403 businesses have received $1.92 billion in loans via the scheme.
Tax flexibility
Finally, the Government is extending the Commissioner of Inland Revenue’s ability to apply flexibility to tax payment dates and terms to help firms with cashflow pressures.
Parker said, “Any businesses struggling to pay tax because of the impacts of Covid should log on to myIR to see if they can delay starting payments to a later date, or if any part of the tax could be written off. Inland Revenue can help with both GST and provisional tax due.”
High level comment
Commenting on the new support measures made available, Robertson said, “As I said back in October when we announced the traffic light system, the Government has been monitoring the impact of the COVID Protection Framework on businesses and the economy.
“With the settings of the framework most businesses can open and operate relatively normally, even at red. We can see that the majority of the economy is operating close to normal, but in some sectors, like hospitality and events, there has been a significant drop-off in business. There are a range of reasons for this, but it is clear that the impact is putting a number of viable businesses at risk of not being able to operate.”
Reason for the RBNZ to hike by 50?
Infometrics principal economist Brad Olsen said the announcement affirms why the Reserve Bank should lift the Official Cash Rate by 50, rather than 25 points, at its review on Wednesday.
"With targeted support once again doing the heavy lifting to support short-term economic disruption, the Reserve Bank should be more aggressive than before today's announcement, given that adding more fiscal support will further aid economic demand amid tight supply," Olsen said.
Clarification: It was initially reported the new payment would cost between $160 million and $260 million. However these figures actually related to each of the three payments. So the total cost is expected to be between $480 million and $780 million.
44 Comments
The relatively new cinema complex in Colombo St Christchurch is seeing the ground floor predomentary food 90% closed and being repurposed to gaming arcade. The rents were astronomic being new build and covid reduced foot traffic saw discretionery income go elsewhere so how will gaming that relies on discretionery income fare , estimates on time from opening to closing requested.
Belle, that has me baffled too. NZ, while not entirely this governments fault, was nonetheless ranked 39th in the world in terms of pandemic preparedness. That should have galvanised some action. NZ had more time than any other country to evaluate the approaching doom of Covid. Yet this government fiddled while the flames grew nearer. Spent $ millions on consultants for decentralisation of the DHBs & at the same time undercut the morale of staffing there, topped with a threatened pay freeze. $ millions allocated to a cycle bridge and airport railway. In the midst of a pandemic do believe year seven schoolchildren could have worked out priorities better than this feeble lot. Would it not have made sense to fast track NZ & other qualified medical professionals to return or be introduced to NZ. Instead MIQ barred them just like all the other legitimate applicants.
I misunderstood Robertson on this. In a press conference he referenced $160m-$260m. I understood this to mean the total cost, but he was referring to the cost of each of the three payments. So, the total cost is expected to be $480m-$780m. I have corrected the story accordingly. Sorry to lead you astray. I thought $160m-$260m sounded a bit low.
I don't really understand why this is pre mid Feb when it is for the Omicron response. Omicron has only just started affecting businesses.
Northland's been in the red setting since we entered the traffic lights and I'm not convinced that warrants financial support, under the vaccine pass system it's only the large venues of over 100 that have been affected, I think they should be clear and say that is who it is for, if that is the case.
And with all these things the devil is in the details. We have been unable to access any covid support thus far despite nearly going under at the start of December due to not getting any Auckland clients for 2 of our busy months when we should have been flat out, and that is due to technicalities and specifics about meeting requirements that gives the staff working at the IRD no room to move either. So with very mixed feelings I read this news. I'll wait till they have a LOT more details before I start looking into anything.
I thought exactly the same when reading the article, Robertson says it's to help businesses that will be affected by the coming Omicron surge yet it's for revenue prior to 15th Feb. I can only guess the reason could be so that businesses can't fudge the income numbers in the coming weeks.
The beehive announcement was a bit clearer and it does sound like the 6w pre 15 Feb will be used as the comparison period but no idea when the affected "drop" period will be. If the first round opens March 1 one can only assume that drop period will need to have been observed before then.
IRD updating their website in "coming days". So hopefully more clarification in due course.
Now says
"Firms must show a 40 percent drop in 7 consecutive days within the 6 weeks prior to the shift to Phase 2 of the Omicron response on February 15, compared to 7 days after that date."
So seems the week from 15th February is the one that needs to be 40 percent down.
UK is dropping self-isolation requirements in favour of personal responsibility. Queen of England 95 has covid and she’s “reducing her workload” while she recovers.
Meanwhile in NZ we have quarantine hotels, vaccine mandates, all sorts of economically and socially damaging policies. We have the largest demonstrations that I’ve seen in my life against the government policy.
It’s almost impressive the level of cognitive dissonance that politicians and the media must possess to keep going with this nonsense.
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