Since 2020, measures to help support businesses adversely affected by COVID-19 were introduced in several waves.

The original package included:

• a tax loss carry-back scheme

• greater flexibility for taxpayers in respect of statutory tax deadlines

• measures to support commercial tenants and landlords, and

• proposed changes to the tax loss continuity rules

• further business consultancy support.

Further developments included wage and leave subsidies, resurgence support, loan products and further tax relief around depreciation, bad debt write-offs and tax losses/refunds for research and development tax credits. Some support measures were extended or adjusted, sometimes repeatedly. We put together this update to clarify where we’re up to with all of them.

Stay in touch. Let us know if you’re worried about not being able to pay your tax on time, if your cashflow is dangerously low, or if you need access to capital. And if you’ve taken advantage of tax relief or business support measures, make sure your records are in good shape to support your tax return.

• Consultancy support - Auckland businesses are eligible for further business advice support from the Regional Business Partner Network as the country transitions to the new COVID-19 Protection Framework.

• Depreciation - From the 2020/21 income year onwards, depreciation is allowable for commercial and industrial buildings. For a limited period, the low-value asset threshold for depreciation increased from $500 to $5,000. For items that fall below the threshold, the depreciation loss is the item’s cost. Above the threshold, items must be depreciated using the diminishing value or straight-line method. The increase allowed the immediate expensing of assets that cost less than $5,000 and that were purchased between 17 March 2020 and 16 March 2021. For assets purchased on or after 17 March 2021, the threshold permanently increases from $500 to $1,000.

• Leave support - The Leave Support Scheme (LSS) is available for employers, including the self-employed, to help pay employees who need to self-isolate and can't work from home. It provides a 2-week lump sum payment of either $585 per week for full-time workers, or $350 per week for part-time workers. A short-term absence payment was added to cover eligible workers (including self-employed) needing to stay at home while awaiting COVID-19 test results. It provides a one-off (once per 30 days) $350 payment. It also covers parents, caregivers, household members or secondary contacts of the eligible worker awaiting test results. You cannot get more than one COVID-19 payment for the same employee at the same time from Work and Income.

• Loan products - The Small Business Cashflow Loan Scheme grants eligible businesses an interest free loan (up to a capped maximum), if they repay it within two years. The scheme has been extended, broadening eligibility, and extending its availability to 31 December 2023. Businesses or organisations that have fully repaid their loan before the end of 2023 can re-borrow.

• Loss carry-back - A temporary tax loss carry-back scheme, limited to a 3-year window, means losses in the 2020- or 2021-income years can be used to offset profits made the year immediately before. If you want to use this option, you need to be eligible and let Inland Revenue know you want to elect into the scheme. If you’re expecting a tax loss for the year ended 31 March 2021, you might be eligible for a refund of provisional tax previously paid for the 2020 year. There has been discussion about introducing a permanent scheme but there’s no further news on this yet.

• Loss continuity rules - These allow tax losses to be carried forward. Up till now, if a company had more than a 51% change in ownership it couldn’t keep its tax losses. As raising capital may result in a change to the existing shareholder structure, companies wanting help need flexibility to access capital and to carry losses forward to offset income when they return to profit. Additional new rules apply for the 2020/21 and later income years with a ‘same or similar business’ test, meaning the business must continue in the same or a similar way it did before ownership changed. Inland Revenue will be alert to prevent loss trading.

• Provisional tax - The RIT threshold for provisional tax increased from $2,500 to $5,000 from the 2020/21 tax year. This allows small businesses to retain cash for longer and reduces the number of provisional tax taxpayers. If you are a building owner, you can adjust provisional tax payments in anticipation of additional deductions available as depreciation for commercial and industrial buildings was reintroduced from the 2020/21 income year. If your business is affected by COVID-19 and you need to re-estimate your provisional tax as your income falls short of the estimate and provisional tax has been overpaid, it may be possible to arrange early refunds.

• Research and Development (R&D) - Start-up companies are able to cash-out their tax losses arising from eligible R&D expenditure and avoid carrying the losses through to the next income year. The rules around R&D expenditure are detailed and eligible R&D expenditure requires approval from Inland Revenue. If you want to claim under these rules, you need to look at this sooner rather than later, and have good records of such expenditure.

• Resurgence support - The resurgence support payment (RSP) is available to help businesses directly affected when there is a move to Alert Level 2 or above for a week or more. Businesses can apply to receive the lesser of:

  • $1,500 plus $400 per fulltime-equivalent (FTE) employee, up to a maximum of 50 FTEs, or

  • 4 times (4x) the actual revenue drop experienced by the applicant.

  The maximum payment is $21,500. A sole trader can receive a payment of up to $1,900. Eligible businesses must have experienced at least a 30% drop in revenue or capital-raising ability over a 7-day period after the increased alert level. Where a business is one of a group of commonly owned businesses, that drop also needs to be present across the commonly owned group as a whole.

  Applications are still open for the RSP for the alert level increase announced on 17 August 2021, so long as the conditions that trigger the RSP apply. Applications for the fourth round opened on 29 October 2021.

  After the fourth round, the RSP moves to fortnightly payments at double the current rate. For the payments starting on 12 November this will be $3,000 per business and $800 per FTE, up to 50 FTEs. This will make the maximum fortnightly payment $43,000. It means the RSP will be a weekly rather than three weekly payment (as it was up till the fourth round), but for smoother administration, available in fortnightly instalments.

  New eligibility criteria were introduced on 9 September 2021. Businesses that have been in operation for at least 1 month prior to the Alert Level increase on 17 August 2021 may now be eligible if they meet all the other eligibility criteria.

  There is provision to apply for businesses still in a start-up phase (‘pre-revenue businesses’) that have taken active steps towards being market-ready while not yet trading.

• Short-term absence payment - See Leave support

• Tax deadlines - Inland Revenue has discretion to grant extensions to filing dates for some income tax returns. Extensions can't be granted for GST and PAYE returns, but late filing penalties may be remitted. Under limited circumstances, late payment penalties may also be remitted.

• Tax debt - If you are unable to pay tax by the due date, Inland Revenue has discretion to write-off penalties and interest. Contact them to indicate when tax can be paid, or request instalment arrangements. You may be eligible for a UOMI write off.

• Tenants and landlords - Temporary law changes were made to support tenants unable to pay rent and landlords unable to meet mortgage payments. These made it easier to retain lease arrangements and get back to business as usual after the pandemic, giving parties more time to fulfil their payment obligations or negotiate temporary changes to agreements or payment plans. These temporary changes have largely ended.

• Vaccinations - In advance of the incoming COVID-19 Protection Framework, the Government have flagged they will clarify the risk assessment required when employers consider whether to mandate vaccination for their workforces. If an employer has already carried out a process under existing health and safety guidelines, this can stay in place. Vaccination will be required of all workers at businesses where customers will be required to show COVID-19 vaccination certificates — for example, those involving close contact with customers, and hospitality. Non-vaccinated workers in roles requiring vaccination are to be given a 4-week paid notice period if they currently do not have a notice period specified or if one less than 4 weeks is set out in their employment agreement. Employers will be required to keep records about workers’ vaccination status.

• Wage subsidy - The wage subsidy scheme (WSS) ensures employers can keep paying their employees, and workers continue to receive income, and stay connected to their employer, even if unable to work their normal hours. The wage subsidy scheme will be in place if there is an escalation to Alert Levels 3 or 4 anywhere in New Zealand, for 7 days or more.

• Wage subsidy August 2021 - Eligible employers and self-employed anywhere in the country may apply for the WSS if they expect a loss of 40% of revenue because of the alert level increase announced on 17 August. Businesses will be eligible for $600 per week per full-time equivalent employee and $359 per week per part-time employee, paid as a 2-week lump sum. The scheme now requires businesses to reapply for each fortnightly payment, unlike the 2020 scheme. Applications for the first five rounds have now closed. Applications for the sixth round opened on Friday 29 October, closing at 11.59pm, Thursday 11 November 2021.

• Wage subsidy tax implications - The wage subsidy is considered excluded income to businesses and is GST exempt. When passed on as wages, businesses don’t get a deduction for income tax purposes. Keep comprehensive records of wage subsidies received and passed on to employees, as well as any subsidies your business subsequently repaid, to be prepared for any adjustments required in your tax return. Inland Revenue have noted where 2021 IR3/IR3NR Income tax returns have not reported WSS payments received in the ‘Government Subsidies’ field of the return. They have flagged they will follow these up requesting returns be reviewed to ensure WSS payments are reported.

• Working from home (WFH) costs and reimbursements - The timeframe for tax-exempt reimbursement payments made by employers to employees for WFH extends to 31 March 2023. Make sure your records have enough detail to show:

  • what period these payments relate to

  • payments comply with requirements for qualifying payments to be treated as exempt income

  • where some payments are exempt and others taxable and where some portions of a payment are exempt but others are taxable

  WFH payments claimed between 17 March 2020 and 31 March 2023 allow an additional $15 per week, per employee, to be exempt income for other WFH expenditure, recognising potential increases in household costs and depreciation loss on existing depreciable assets (i.e. not in relation to telecommunications costs).

  Payments may be tax exempt reimbursing furniture or equipment purchases when WFH to reimburse depreciation on the item. The payment will typically be for the cost of the asset and the payment will still be deductible to the employer. Note the $5,000 low-value asset threshold applying between 17 March 2020 to 17 March 2021 applies here. From 17 March 2021 onwards the threshold resets to $1,000.

• WFH and telecommunications - For telecommunications devices/plans, where staff use their own devices for work, staff reimbursements are exempt income up to $5 per week. If reimbursement is above this amount, the exempt amount is:

  • 25% if the device/plan is used partly,

  • 75% if used mainly, or

  • 100% if used exclusively for employment purposes

  WFH payments for telecommunications devices/plans claimed from 1 October 2021 to 31 March 2023 allow either:

  • a $20/week reimbursement, per employee, OR

  • if the device is used partly for work, 25% of telecommunications costs plus $15 to be exempt income for other WFH expenditure OR

  • if used mainly for work, 75% of telecommunications costs plus $15 as exempt income for other WFH expenditure.

• Write-offs - Ordinarily, a bad debt must be written off by the end of the tax year. For the 2020 year, the timeframe to write off a bad debt and be able to claim a deduction for that income year was extended to 30 June 2020. This is subject to conditions. Make sure your records for the 2020 and 2021 years reflect any write-offs for bad debts for the relevant period and have sufficient detail to justify the write-off.