We hope that you and your families are keeping safe during the lockdown, which started almost a week ago. This situation is unprecedented in our history, and we know that many of our clients are struggling to know how they will find a way through this. The government is continually changing its coronavirus relief measures, and we wanted to bring you up to date with:
- Wage subsidy scheme
- Should I talk to my landlord for a rent holiday?
- Should I talk to my bank about modifying my loan payments?
- What if I can’t pay my tax?
- Cash flow forecasts
We are here to help. At Hounsell Accounting, we are all working from home at the moment but we can be contacted by email or the usual office phone number (09-418-2729). So do let us know if you have any questions on anything in this article
Wages subsidy scheme
Many of you have already applied for and been paid this subsidy. The subsidy is paid as a lump sum, and covers 12 weeks. Some points to note:
- You will qualify if you expect your business’s turnover to be reduced by at least 30% due to the impact of coronavirus.
- You must continue to pay your employees for 12 weeks. You are required to use your best endeavors to pay them 80% of their normal pay, but if this is impossible (such as the case where all business activity has ceased) you must pay them at least the amount of the subsidy.
- If your employee’s normal pay is less than the subsidy you can continue to pay them their normal pay.
- This subsidy is payable to self-employed people as well as employers.
- If it turns out that you receive more subsidy than you are eventually entitled to, you may be required to refund the overpayment.
- Full Details of the subsidiary can be found here https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html
- Common questions and answers can be found here . https://www.workandincome.govt.nz/products/a-z-benefits/employer-questions-and-answers.html
- You can apply online here
- Employer applications https://services.workandincome.govt.nz/ess/employer_applications/new
- Self employed applications https://services.workandincome.govt.nz/ess/trader_applications/new
Some administrative points about the subsidy
- The subsidy is not subject to GST. If you are using accounting software, we suggest you set up a new Income account classified as exempt from GST – if you need help with this, please call us.
- If you are not paying your employees their normal wages or salaries, but just passing on the subsidy, then we recommend that you create an additional pay code of ‘COVID-19 wages subsidy’ to show on their payslips. Again, we can help with this if you need us.
- The payment for the wage subsidy to staff is still subject to PAYE.
Should I talk to my landlord for a rent holiday?
We suggest you have a look at your lease agreement to see if there is a clause which allows a reduction in rent in the case where you are unable to access the building due to an emergency. These clauses allow you to negotiate in good faith with your landlord about a rent reduction during the lockdown. Even if you don’t have a clause we would encourage you to contact your landlord anyway.
Should I talk to the bank about modifying my loan payments?
Banks are offering additional flexibility around the loan repayments we recommend contacting your bank to see what options there are for you. Do however be careful as most of the options are simply delaying or deferring payments which will need
What if I can’t pay my tax by the due date?
Normally we would strongly advise that you need to contact Inland Revenue (or we contact them for you) before the due date if you are unable to make a tax payment. However, Inland Revenue are saying that there is no need to contact them now as they do not have the resources to deal with the expected influx.
- If you are unable to pay the tax due on 7th April, we recommend that you pay as much as you can and then make an arrangement with Inland Revenue to pay the balance off over time. If you inability to pay was due to the effects of COVID-19, Inland Revenue will adopt a sympathetic approach to waiving late payment penalties and interest.
- If you are unable to pay the Provisional Tax due on 7th May, then please talk to us about this, as there are a number of different options you can take.
If you are unable to pay other taxes such as GST, please talk to us.
Cash flow forecasts
In order to understand what sort of relief you may need from your landlord, the bank the Inland Revenue or how much you can afford to pay your staff, you may need to do a bit of a cash flow forecast to predict where you will be in 4 week, 8 weeks or 12 weeks. There is so much uncertainty at present that any predictions will be inaccurate – but if you have a forecast, you will be able to modify it as time goes on. It will help you in planning for the survival and recovery of your business. Of course we would be please to help you with this – just let us know.
The material on this website is for the benefit and information of clients. The items are in the nature of general comments only, and are not to be used, relied or acted upon without seeking further professional advice. Hounsell Accounting Limited accepts no liability for any errors or omissions, or for any loss or damage suffered as a result of any person acting without such advice