The Government has announced Covid Support payment of $4,000, plus $400 per full-time equivalent worker (up to 50 FTEs), each fortnight for six weeks to eligible businesses. The relevant eligibility criteria will need to be met for each of the three payments. The maximum entitlement will therefore be $72,000, or $24,000 per payment for an employer with 50 or more employees.
For businesses with low revenue, the amount of the CSP is capped at eight times the actual decline in revenue.
The CSP can be used to cover business expenses. GST registered recipients will need to return GST on the amount of CSP received but will be able to claim back GST input tax as the money is applied to business expenses.
Eligibility criteria
Businesses who have faced a 40% reduction in revenue as a result of either the presence of COVID-19, public health measures to reduce the spread of COVID-19 or businesses circumstances that are reasonably likely to be as a consequence of COVID-19 could be eligible. There are several options to calculate the revenue loss and this is explained below.
Other criteria to be aware of include:
- The business must have been operating since at least 16 January 2022
- Be Physically present in New Zealand
- The business must be viable and ongoing.
- Have had at least a 40% drop in revenue or capital raising as a result of one or more COVID-19 circumstances.
- All reasonably practical steps must have been taken to minimise the decline in revenue
- COVID-19 Vaccine Certificate requirementsmust have been complied with
- Commonly owned groups have specific rules for calculating the revenue drop, but in summary, the whole commonly owned group must have suffered a 40% revenue drop, and each business within the commonly owned group that has had a stand-alone 40% revenue drop can make a separate claim.
It is important to note that businesses that are able to operate under the Red setting of the COVID-19 Protection Framework but have chosen to close temporarily without taking all reasonably practical steps to minimise revenue loss will not be eligible.
How to determine a Revenue drop
The key issue for businesses will be to understand how to calculate whether the 40% revenue drop has been satisfied, and this is where it can start to get complicated.
1) For the 1st CSP, businesses will need to show their income is 40% lower in a 7- day period any time between 16 February 2022 and 4 April 2022, compared to a typical week between 5 January and 15 February in either 2021 or 2022.
2) For the 2nd CSP, businesses will need to show their income is 40% lower in a 7- day period any time between 7 March 2022 and 4 April 2022, compared to a typical week between 5 January and 15 February in either 2021 or 2022.
3) For the 3rd CSP, businesses will need to show their income is 40% lower in a 7- day period any time between 21 March 2022 and 4 April 2022, compared to a typical week between 5 January and 15 February in either 2021 or 2022.
“Typical” revenue is revenue that a business has earned during a 7-day period that is considered to be normal or representative of the businesses’ revenue. When determining typical revenue, businesses can apply a degree of pragmatism (ensuring it is documented); for example, revenue can be averaged over the 6-week period and a 7-day period chosen which is closest to the average revenue, or periods where there is no trading can be excluded (for example, the business was closed over the holiday period or for public holidays). Similarly, thought should be given to how events, such as school holidays or Christmas closedowns, influence “typical” revenue in the comparison period. The calendars below outline some events to be aware of when determining what may be the most appropriate comparison period.
Inland Revenue is once again administering the scheme through the myIR system. Due to changes to how the revenue loss calculation is to be determined, there are different application dates. Businesses can compare revenue to 5 January – 15 February 2022 or same period of 2021.
Applications will be open for at least six weeks.
Each of the three payments will need to be applied for separately, with a continued 40 percent reduction in revenue being required for each payment.
Other Business Support
The Government has also announced some improvements to the Small Business Cashflow Loan Scheme to help business and organizations struggling with a loss of actual revenue due to Covid 19. Applications are open until 31 December 2023.
In February 2022, the Government announced that the SBCS base loan would soon be increasing to $20,000 (from $10,000). This means that for new loans the amount that can be borrowed will be $20,000, plus $1,800 per full-time equivalent employee (up to 50 employees). The loan repayment period remains 5 years (60 months).
Existing borrowers will also benefit from this change as they will be able to apply for a top up loan of $10,000, plus any amount they were eligible for but did not take in their initial loan. This will be open for applications from 21 March 2022.
The first 2 years of existing and new loans will be interest-free provided the loan is not in default. Interest will apply at a rate of 3% per year on the remaining loan balance from the first day of the third year of the loan period.
Covid 19 Leave Support Scheme
The COVID-19 Leave Support Scheme is available to employers, including self-employed people, to help pay their employees who must self-isolate because of COVID-19 and can’t work at home during that period.
To be eligible for at least one payment of the Leave Support Scheme your employee will have been required to self-isolate for at least 4 consecutive calendar days.
This means your employees:
- can’t come into work because they are in one of the affected groups and must self-isolate, and
- can’t work from home.
The COVID-19 Leave Support Scheme is paid at the rate of:
- $600 for full-time workers who were working 20 hours or more a week.
- $359 for part-time workers who were working less than 20 hours a week.
You may be able to get more than one Leave Support payment if your employee or you, if you’re self-employed, must keep isolating.