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Support for small businesses

type
Article
author
By Institute of Directors
date
8 May 2020
Person running along road next to white modern building

Small businesses are a vital part of New Zealand’s economy making up 97% of all enterprises. The impact of COVID-19 has seen some businesses folding and many others fighting to survive as they tackle a myriad of issues including operating restrictions, a significant downturn in revenue, supply chain issues, redundancies and a future full of uncertainty. It is a difficult time for many governing these businesses but there is support available to help them stay afloat while the economy adjusts and recovers.

The following support is available:

Economic support

Wage subsidy support

The Wage Subsidy Scheme is designed to support employers adversely affected by COVID-19, and ensure workers can continue to receive an income even if they are unable to work. Eligibility criteria includes having had a 30% revenue drop due to COVID-19. Employers need to retain employees for at least 12 weeks. 

A Wage Subsidy Extension will be available from 10 June – 1 September 2020 to support employers, including sole traders, who are still significantly impacted by COVID-19.

Tax relief and small business cashflow loan scheme

Tax relief includes:

  • interest remission on a late payment where a taxpayer has been significantly adversely affected by COVID-19
  • an increased threshold for paying provisional tax
  • discretion for Inland Revenue to extend taxation due dates
  • the introduction of a temporary tax loss carry-back scheme. (Businesses expecting to make a loss in either the 2019/20 year or the 2020/21 year would be able to estimate the loss and use it to offset profits in the past year). More details are available on the IRD website

The Small Business Cashflow Loan Scheme introduces an interest-free loan scheme to some small businesses impacted by COVID-19, administered by Inland Revenue. Applications are open from 12 May – 12 June 2020 inclusive. Details include:

  • businesses must employ 50 or fewer FTEs and must have received less than $351,480 in wage subsidy
  • eligible businesses are entitled to a one-off loan of $10,000 plus $1800 per FTE, to a maximum of $100,000
  • loans will be interest-free if they are paid back within a year. After that, the interest rate will be 3% for a maximum term of five years.
  • repayments are not required for the first two years.
Mortgage holidays

The Government has announced a six-month mortgage principal and interest payment deferral for affected individuals and SMEs.

Business finance guarantee scheme

A $6.25b business finance guarantee scheme for SMEs includes:

  • a limit of $500,000 per loan
  • it applies to businesses with an annual revenue between $250,000 and $80m
  • loans will be for a maximum of three years and are expected to be provided by banks at competitive rates.
Insolvency support

The COVID-19 Response (Further Management Measures) Legislation Act 2020 includes:

  • a temporary ‘safe harbour’ from insolvency-related directors’ duties under the Companies Act 1993 and
  • a new regime which will allow some organisations affected by COVID-19 to temporarily place existing debts into hibernation (ie a moratorium on the payment of debts).

See MinterEllisonRuddWatts’ and KPMG’s article Directors’ duties during COVID-19.

Commercial leases

Rent and mortgage relief

The COVID-19 Response (Further Management Measures) Legislation Act 2020  introduces support for businesses and commercial landlords to manage situations where, because of the impact of the response to COVID-19, businesses are unable to pay their rent and landlords are unable to meet their mortgage payments. Support includes extending the notice period:

  • and the period lessees must be in arrears before landlords can cancel commercial leases
  • before mortgagees can exercise certain rights under the mortgage, such as the right to sell or repossess the property.

The government is also considering options for rent concessions to support New Zealand businesses with rent payments but has ruled out subsidising or freezing rent.

Potential rent and outgoings abatement

Some commercial leases have clauses relating to circumstances where a tenant has no access to the premises during an emergency, which may give rise to a rent and outgoings abatement during Alert Levels 3 and 4 (but is unlikely to apply in Alert Level 2). This is explained further in MinterEllisonRuddWatts’ articles:

Professional advice and support

The COVID-19 Business Advisory Scheme

The government has allocated an additional $25m to enable businesses  to access expert advice and support in areas such as HR, health and wellbeing, business continuity, cashflow and finance management, strategy and digital capability. Business owners can access up to $5000 (excl GST) per business from the COVID-19 Business Advisory Fund.

Our new online coaching and mentoring service can provide coaching to eligible SMEs.

Support for Māori businesses

Targeted support packages

Māori communities and businesses can access additional help and support designed to meet their specific needs including:

  • a Whānau Māori Community and Mārae package reprioritising $10m from the Māori Development vote to support community outreach
  • Māori Health and Whānau Ora response with $30m targeted directly to Māori Health services and an extra $15m to Whānau Ora commissioning agencies
  • supporting Māori Businesses and engaging with Māori with $1m of funding to enable a needs assessment for Māori businesses, and $470,000 to Te Arawhiti to engage and work with iwi on their COVID-19 pandemic response plans.

Support for exporters and importers

Export business continuity service

NZTE has launched a $4m Export Business Continuity Service, in partnership with PwC and Deloitte. Businesses with established export markets can access professional services to help them manage the impacts of COVID-19 on their businesses to a maximum of $5000 per business.

Our new online coaching and mentoring service is registered with the NZTE management capability development fund and is open to eligible SMEs.

Air freight support package

NZTE and the Ministry of Transport are assisting Air NZ with funding support to provide additional charter flights to help meet air freight capacity demands.

NZ marketplace

NZTE has created an online marketplace to help exporters find offers and requests for resources.

Tariffs removed on some imports

The government has temporarily removed tariffs on all medical and hygiene imports needed for the COVID-19 response.

Annual meetings, reporting and rules

Relaxed deadlines and temporary relief

The COVID-19 Response (Further Management Measures) Legislation Act 2020 includes:

  • provisions to extend statutory deadlines (eg for holding AGMs, and filing annual returns) for some entities
  • temporary relief for entities that are unable to comply with obligations in their constitutions or rules because of the impacts of COVID-19
  • provisions to enable entities to use electronic communications (including electronic meetings) even if their constitutions or rules do not cover this.

The Government's COVID-19 website has a financial support tool to help businesses work out what help and support is available to them. Also see Manaaki, an online business advisory support forum.  

For a summary of support available for NFPs see our article Governing NFPs through COVID-19 - support is available

We will continue to keep you updated of any significant changes that are relevant to SMEs. This will include updates to resources on this page.

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