PKF Francis Aickin Limited, Far North, New Zealand
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25 Jun 2020
Fingers crossed, we are through the worst of the direct health issues surrounding COVID-19 and, providing the border controls are well policed, we will have fared better than most nations around the world.
However, the economic consequences of COVID-19 are only just beginning.
Most businesses will have just finished paying their twelve-week wage subsidies and considering whether they qualify for the eight-week extension.
Businesses can only claim for the extension once they have completed paying the initial twelve-week subsidy.
On the day you apply, a business is required to look back over a 30-day period within the last 40 days and calculate whether revenue has fallen by at least 40% compared against the same period last year. If you are a new business, you measure against a prior comparable 30 day period, and you must have been in business for at least 60 days. Applications for the wage subsidy extension can be lodged until 1 September 2020. The application process is very similar to the initial wage subsidy.
These subsidies have been most welcome and have certainly ensured businesses have weathered the initial storm of lockdown. But the wage bill is only one cost that businesses must meet.
Although there haven’t been any subsidies to assist with operational costs, the Government have introduced a small business cash flow loan scheme which is administered by the IRD.
Businesses with 50 or less employees can obtain a loan from the government for up to $10,000 plus an additional $1,800 for each full-time equivalent employee or working owner. A sole trader can therefore get a loan of $11,800.
There was much excitement that this loan was interest free if repaid within a year, which it is. However, the fact that no repayments are required for the first two years, is likely to be much more helpful to businesses in the short term. These loans charge 3% interest per annum, and the interest is not compounding. Even if you don’t make any repayments in the first couple of years, interest is only charged on the loan, you do not pay interest on the interest!
These loans provide much needed working capital to small businesses and help them meet their other operational costs. Businesses need to apply for this loan through their MyIR account with the IRD. The process is quite straightforward and typically the IRD approve loans within 48 hours. But if you haven’t already applied, time is running out, applications close on 24 July.
There are lots of places to get help or information - one I like is on www.business.govt.nz Kiwi Business Boost, which lets you specify your situation and offers guidance of where to find help.
There is little doubt that COVID-19 is going to push the country into recession. The one silver lining ….. situations like this often bring out kiwi ingenuity. Many people will lose their jobs but will turn that adversity into a positive. A recession brings new entrepreneurs who will use the nudge from unemployment to go it alone and set up their own business.
For people considering starting a business for the first time, there is a wealth of information from the IRD, Northland Inc, MBIE to name just a few. I am also always happy to have a complimentary meeting with anyone brave enough to start up their own business in these challenging times.
The impact of COVID-19 affects us all in different ways. Don’t be afraid to reach out and get the help you need.
For support with anxiety, distress or mental wellbeing, you can call or text 1737 to talk with a trained counsellor for free, 24 hours a day, 7 days a week.
The below Government site has lots of information.
For more information on how we can help your business, get in touch