Fiscal response to COVID-19 announced by Government
Finance Minister Grant Robertson announced the Coalition Government’s package to cushion
the economic impact of the COVID-19 virus on 17 March at 2 pm. Calling the $12 billion
package “the most significant peace-time economic plan in modern New Zealand history”,
the Finance Minister noted the following key planks to the policy:
• business cashflow and tax relief measures (both permanent and temporary)
• a 12-week wage subsidy scheme
• an 8-week cash top-up scheme for workers, contractors and the self-employed taking
leave for COVID-19 reasons, and
• income support measures (both permanent and temporary) for beneficiaries and
superannuitants.
Tax relief measures Tax measures announced by the Government to alleviate business
cashflow concerns are as
follows:
• Re-introducing depreciation for buildings Depreciation deductions at 2%
diminishing value will be re-introduced
for commercial and industrial buildings from the 2020/21 income
year. The depreciation deductions will be available to all sectors and will apply to
both new and existing buildings on a permanent basis. Building owners will be able to
adjust provisional tax payments immediately in anticipation of the additional deductions
that will become available.
• Increasing the low-value asset write-off threshold An immediate tax write-off will
be available for more low-value assets to encourage spending. This incentive is being
delivered in two stages. As a temporary measure, assets costing up to $5,000 will be
eligible for an immediate write-off for the 2020/21 income year. From the 2021/22 income
year, the existing $500 threshold for an immediate write-off will be increased to $1,000
on a permanent basis.
• Increasing the provisional tax threshold from $2,500 to $5,000 Currently,
taxpayers with a residual income tax of $2,500 or more are required to pay provisional
tax throughout the year. This threshold will be increased to $5,000 from the 2020/21 tax
year, meaning that less businesses will need to front the cash to meet their provisional
tax obligations.
• Use-of-money interest write-off for struggling taxpayers Businesses and
individuals who are adversely affected by COVID-19 and who can demonstrate the inability
to pay tax by the due date may be eligible for a use-of- money interest write-off. The
relief will apply to all tax payments including provisional tax, PAYE and GST due on or
after 14 February 2020. Currently, this measure will last for two years, unless extended
by the Government. Details on objective tests to be applied will be released by Inland
Revenue in the coming days. The above changes will be contained in a tax bill to be
introduced soon.
Twelve-week wage subsidy scheme From 17 March (and for the next 12 weeks), wage
subsidies will be available for all employers that are significantly impacted by
COVID-19 and are struggling to retain
employees as a result. The scheme will be open to sole traders and the self-employed as
well as firms. The subsidy is:
• $585.80 per week for a full-time employee (20 hours or more), or
• $350.00 per week for a part-time employee (less than 20 hours).
The payment is made as a lump sum for a period covering 12 weeks. The maximum amount any
one employer can receive is $150,000. Employers must have suffered, or be projected to
suffer, at least a 30% decline in revenue compared to last year for any month between
January 2020 and June 2020. Applications can also be made on the basis of forecast
revenue loss within the period of the scheme. Key undertakings required from the
employer are:
• On their best endeavours, they will continue to employ the affected employees at a
minimum of 80% of their income (eg 4 out of 5 days of the week) for the duration of the
subsidy period.
• Employers must also have taken active steps to mitigate the impact of COVID-19 (eg
engaged with their bank/financial advisor) and signed a declaration form to that effect.
Applications for the subsidy can be made through the Work and Income website www.workandincome.govt.nz. The Ministry of
Social Development (MSD) will aim to make first payments no later than five working days
from when applications are received.
