Mid Year Catchup & Post Covid - What you need to know.
ACC - Easing the Burden on Business
As part of ACC's plan for helping reduce the immediate impact of Covid-19 in businesses, ACC has delayed all invoicing by 3 months.
Invoices for the 2020/21 financial year which would have usually been sent from 1 July will now be issued in October. Payment options will be available once invoices are sent in October to further assist in managing the payment of your ACC levies.
If you have CoverPlus Extra with ACC you will be contacted by them directly about your levy invoice being sent in July. These invoices are normally sent in April, but were delayed by 3 months to help ease any immediate financial pressure.
Choosing to be invoiced as normal ? - ACC is also providing you with the option to continue to be invoiced as per normal, if that better suits the needs of your business. You can do this through your MyACC for business account or contact your BM advisor to arrange for you.
ACC is asking customers to consider this choice carefully, and only request this option if you're able to pay any resulting invoices in full or through an instalment plan. By making this request you will get all pending invoices or reassessments associated with your account, not just the 2020 or 2021 financial years.
Most of you will be aware of the Wage Subsidy Scheme introduced by the Government as part of their business support for businesses impacted by Covid-19. You can no longer apply for this scheme, but you may be eligible for the Wage Subsidy Extension.
You can apply for the Wage Subsidy Extension for your employees, even if you haven't applied for the Wage Subsidy for them before. If you have been a part of the original subsidy scheme you will receive an email from the Ministry of Social Development outlining the application process a few days before your 12 week period is completed.
To qualify for the 8 week Wage Subsidy Extension, your business must have experienced a 40% decline in revenue for a continuous 30 day period and this period needs to be in the 40 days before you apply and must be compared to the closest period last year. The decline must be related to COVID-19.
Each business and situation is different, you need to be aware of your individual circumstances and obligations. The MSD is yet to release exactly how they intend to audit businesses that have claimed the subsidy, and what information they expect to see.
If you have applied or will be applying, we strongly recommend that you can document and evidence the 30% or 40% reduction in revenue, and that this is due to COVID-19, and also document evidence that you have taken active steps to mitigate the impact of COVID-19.
Some businesses may have applied for the original Wage Subsidy Scheme, based on a forecasted 30% reduction in revenue. If this has not eventuated, then you no longer meet the criteria for the subsidy and must repay the subsidy.
The website at MSD/WINZ contains some useful and concise information regarding this current scheme.
Low Value Assets
The Government also passed legislation that temporarily increases the low-value asset threshold for depreciation from $500 to $5000 (excluding GST, if GST registered).
This allows you to deduct the full cost of your business assets with a value of less than $5000 in the year of purchase.
The $5000 threshold applies to assets purchased on or after 17 March 2020 until 16 March 2021. From 17 March 2021, the threshold will be permanently increased from $500 to $1000. If you have any business assets purchased between $1000 and $5000, we suggest that you continue to code these in as fixed assets purchased in your accounting system. We will then apply 100% deprecation in your end of year accounts to get the 100% deduction in year of purchase for tax purposes. This ensures that the asset is still recorded for future reference (when you may sell).
Please contact your BM advisor to discuss your specific situation.
Depreciation on Buildings
From the 2020-2021 income tax year onwards, depreciation now applies to commercial and industrial buildings. Previously, tax depreciation on all buildings was at 0%. Residential buildings are not part of these depreciation changes.
If a building was previously depreciated, or newly purchased, then it is automatically deemed to be depreciated under this new scheme unless you elect not to, and inform IRD of that election. The election must be communicated to IRD when filing the relevant income tax return.
The application depreciation rates are 2% DV and 1.5% SL.
Temporary Loss Carry-Back Scheme
Businesses expecting to make a loss in either the 2020 year or the 2021 year can use that loss to offset profits they made the year before.
In other words, they can carry back one year to the preceding income year. This can be done before the loss year return is filed.
There are two ways to claim your loss carry-back:
1. Include the carried back loss in your tax return – IRD will automatically refund any overpaid tax.
2. Ask for a refund of any provisional tax you have paid for 2020 if you are going to carry back a loss from 2021.
IRD can refund some or all of the tax already paid for the preceding year before the loss year has finished by enabling customers to estimate their loss. Refunds will be processed a lot faster if you use myIR.
You must let IRD know if you are going to use the loss carry-back scheme. You can do this in the “I want to” section of your income tax account in MyIR.
If you think this might apply to you, please contact your BM advisor to discuss.
Small Business Cashflow (Loan) Scheme (SBCS)
Organisations and small to medium businesses, including sole traders and the self-employed, may be eligible for a one-off loan with a term of 5 years if they have been adversely affected by COVID-19.
The Small Business Cashflow (loan) Scheme has been extended for a further six weeks. Applications opened on 12 May 2020 and can now be submitted up to and including 31 December 2020.
Eligible businesses and organisations are entitled to a one-off loan. The maximum amount loaned is $10,000 plus $1,800 per full-time-equivalent employee. You must have 50 or fewer full-time equivalent employees.
The annual interest rate will be 3% beginning from the date of the loan being provided. Interest will not be charged if the loan is fully paid back within one year. There are a number of terms and conditions around this loan scheme that you agree to when you apply for the loan. You need to be fully aware of these to ensure that you do not fall outside of these as you may trigger full interest on the loan at the penalty interest rate, which could mean interest from day 1 at 3% plus the Use of Money Interest (UOMI) rate (which is currently 7.00%). So your interest free loan could suddenly be at 10.00%.
A couple of Employment Law changes have just come into effect as below:
- Effective from 1 July 2020, Paid parental leave has increased from 22 weeks to 26 weeks, and payments have gone up as well.
- ‘Keeping in Touch’ days have increased from 52 to 64 hours (this allows an employee on parental leave to attend work here and there e.g. training/planning days, and get paid by their employer without affecting their parental leave)
- Employment Relations (Triangular Employment) Amendment Act: If you are employed by ABC Ltd, but they hire your labour out to 123 Ltd, previously if there was a grievance you could only bring it against your employer (ABC Ltd). You can now bring it against both your employer and the 3rd party (123 Ltd). This came into effect 28 June 2020.
- Businesses needing ‘Critical’ workers from overseas can apply, assessed on case-by-case business. There are separate criteria for short term (less than six months) and long term (six months or longer) workers. Approved overseas workers may need to wait for space in managed isolation, which may delay arrival.