It is clear that COVID-19 has the potential to be the cause of the largest global depression in modern history; certainly the biggest since the 1930s. Scary though this is for business owners to contemplate, there is also good reason to believe that the economy here in New Zealand will prove more resilient than those of many other, worse-hit countries.
As your local accountants, the team at Agar Fenwick are here to help you with your financial preparations and obligations, as well as explaining the changes put in place by the New Zealand government to provide relief and help businesses to survive.
Business Contingency Planning: Surviving Post COVID-19
In times of fiscal uncertainty, planning financially for what comes next often means hoping for the best, whilst preparing the worst. The full economic impact of COVID-19 – on both a national scale and within our local communities – remains to be seen, which is why it is crucial to take steps NOW to ensure a smart, robust business contingency or continuity plan exists for your organisation.
Continuity plans can protect your business, assets and employees and often mean the difference between recovery and closure.
A contingency plan is a documented process that identifies specific risks facing your business along with the appropriate actions and responses you might need in order to get back to ‘business as usual’ or minimise losses.
If you have little experience in implementing this type of strategic planning, we recommend checking out this helpful step-by-step guide from business.govt.nz to get you started.
As experienced chartered accountants, the team here at Agar Fenwick excel at bringing clarity to business owners when it comes to evaluating the financial impact of unforeseen circumstances. We also provide sound advice on key decisions and process changes.
If you require any assistance in formulating your business continuity plan, get in touch with us today or contact your client manager directly.
Multi Billion Support Package for New Zealand Businesses Affected by COVID-19
Back on March 17th, Government Finance Minister Grant Robertson announced a financial relief package for businesses and employees impacted by the COVID-19 pandemic. Proposed changes to the Companies Act intended to help businesses get through this period have also been publicised.
Approximately $12 billion (previously capped at $5.1 billion) in wage subsidies is expected to be paid to affected business across all regions and sectors. Caveats exist, although the previous maximum amount of $150,000 per any one employer has been lifted.
Note that since its initial announcement, several changes have been made to the Wage Subsidy Scheme including amendments to the eligibility criteria. This subsidy must be applied for directly by the employer through WINZ and clients who are unsure about this process should feel free to get in touch with their client manager for guidance.
Other key highlights announced to date include:
- A COVID-19 Essential Workers leave and Self-Isolation Support subsidy for employers. Note that only this or the Wage Subsidy can be claimed: not both.
- A reinstatement of building depreciation on commercial and industrial properties.
- The writing-off of interest on the late payment of tax.
- Increasing the small asset depreciation threshold from $500 to $1,000 – and to $5,000 for the 2020/21 tax year.
- Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/21.
- The IRD now have the discretion to remit use of money interest for customers significantly affected by COVID-19.
- A relaxing of the ‘insolvency duties’ incumbent upon company Directors whose business’ face liquidity problems.
- The introduction of a scheme whereby company debts can be placed into a period of hibernation.
- An extension to deadlines including company office annual returns, company AGMs, etc.
- Permitting the use of electronic signatures, where necessary.
For more information on the changes, click here to read the original government press release, which includes a statement from Finance Minister Grant Robertson and factsheets on business cashflow and tax measures; leave support; income support and the wage subsidy scheme.
For information on insolvency relief for businesses, visit this page on the Companies Office website.
Tax Relief Measures in Place Due to the Effects of COVID-19
The IRD is sympathetic to the pressure that COVID-19 and the lockdown has placed upon businesses in relation to their tax obligations.
On March 11th, the IRD announced several beneficial relief options they’re offering business owners (depending on circumstances and criteria), including:
- Provisional tax re-estimates.
- Early refunds on overpaid provisional tax.
- Tax instalment payments & write-off arrangements.
- Extensions to filing dates.
- Remittance for late payment penalties.
- Certificate of exemption for schedular payments.
- An increase in the minimum value of assets (allowing more essential purchases to be treated as revenue costs).
To find out if any of the above might be applicable to your business, the IRD recommends speaking to your tax agent. Agar Fenwick clients should feel free to contact us anytime to discuss their circumstances and we will be happy to guide you through the options available.
For more information on the specific relief options the IRD have made available, click here to visit the IRD website.
Keep Lines of Communication Open
Things are always easier when everyone is on the same page.
Maintain honest and open communication with your bank, especially if you’re unsure how your business is going to be impacted. The sooner the bank is made aware of any issues, the better they’ll be able to support you through the process.
Take the time to check in with your business advisors, mentors, business support groups and of course, your accountant. Ask how other similar businesses are being impacted. The effects of COVID-19 are far-reaching, so don’t feel as though you’re suffering alone.
Look after your Employees
Employees are often your biggest asset and it is important to ensure that you are meeting all your obligations as an employer. The team at Sidekick HR have put together a blog post of important FAQs that outlines some of the key things that you as employers need to monitor including:
- Health and Safety obligations
- What happens to employees pay if they cannot work
- Eligibility for the wage subsidy
- Varying the terms of your employees’ employment.
How Can We Help?
At Agar Fenwick, we’re conscious that many businesses throughout our regional communities will need assistance, especially those servicing the tourism and export industries.
We’re here to help – whether through specific business advice; a general chat around current and future economic impacts; or to formulate a business contingency plan that works for your organisation.
Our team is working from home throughout the Level 4 lockdown. If you have any concerns or queries, you can reach out to us for a conversation and we’ll do our best to help.