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May 2020 – Covid 19 Update

covid 19

What a strange and difficult time we are all living through. We hope you and all your family are safe and well. 

There have been several tax changes and initiatives to help New Zealand business owners, which we have detailed below.

Also, the Government has launched a new helpline to provide all NZ businesses with advice and to connect them with additional support:

  • specific advice and access to Government-funded business support
  • advice on what Alert Level 3 means for your business
  • general business advice and access to online resources and webinars
  • connections to business advisory services.

To find out more about this call 0800 500 362 (North Island), or 0800 50 50 96 (South Island).

COVID-19 Small Business Cash Flow Loan (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 (SBCS) has been introduced to support businesses and organisations struggling because of loss of actual or predicted revenue as a result of COVID-19. They must have 50 or fewer full-time-equivalent employees.

Inland Revenue will administer the payments and repayments of this scheme. Applications will be open from 12 May 2020 to 12 June 2020 inclusive.

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.

Loans will be subject to an annual interest rate of 3% from the date it is provided by us.

If you repay the loan in full within 1 year you won’t be charged any interest. If you do not repay the loan in full within one year, you will be charged interest for the entire term of the loan.

Repayments are not compulsory in the first 24 months. Voluntary payments can still be made over this period. After 24 months, you will be required to make regular payments for both the principal and interest.

MORE INFO HERE

Business Finance Guarantee Scheme

Government has launched a business finance guarantee scheme for small and medium-sized businesses, to protect jobs and support the economy. The Crown, in partnership with participating approved banks, will support targeted new loans (including increases to existing limits) to eligible businesses, as a response to difficulties caused by COVID-19.

Under the scheme, businesses with annual revenue between $250,000 and $80 million can apply to their banks for loans up to $500,000, for up to three years. 

Government is guaranteeing 80% of the risk, while the banks are covering the remaining 20%. A normal lending process will be followed by the banks, which will make the lending decisions. Further details can be found on the banks’ websites.

Business Support

The Government has allocated additional funding to the Regional Business Partner Network to support New Zealand businesses and service providers during the COVID-19 pandemic.

The Covid-19 Business Advisory Funding will provide support in areas such as HR, health and wellbeing, business continuity, cashflow and finance management, strategy and digital capability.

Check it out at https://covid19.nzte.govt.nz/page/regional-business-partner-network/#how

Wage Subsidy 

Employers, including sole traders and self-employed, may be eligible for a wage subsidy paid by the MSD if they have been affected by COVID-19 and had a 30% actual or predicted revenue decline. 

The COVID-19 Wage Subsidy will be paid at a flat rate of:

    $585.80 for people working 20 hours or more per week (full-time rate)

    $350.00 for people working less than 20 hours per week (part-time rate).

The subsidy is paid as a lump sum and covers 12 weeks per employee. It needs to be paid to employees through their normal PAYE wages.

GST – There is no GST on the wages subsidy. 

Income Tax – For self-employed, you will need to pay income tax on this as it replaces your lost earnings. For employers, you don’t need to pay income tax and you can’t claim the wages you pay using the subsidy.

Working for Families

In-Work tax credit, you no longer need to work at least 20 hours for a sole parent or 30 hours for couples to be eligible for the in-work tax credit. This means that working families who have a reduction in working hours as a result of COVID-19 do not lose their eligibility for the IWTC.

Working for Families Tax Credits entitlements are based on your yearly family income. So If your family income has decreased, you may be entitled to increased payments or an increased frequency of your payments. Log into you My IR and update your Family Details.

Tax Initiatives

Depreciation on Commercial Buildings

Depreciation on Commercial buildings has been reintroduced from 1 April 2020 at 2% diminishing value. This does not include Air BnB type properties.

Increased Provisional Tax Threshold

Increase in provisional tax threshold from Residual income tax of $2,500 to $5,000 for 20/21 year. 

This will mean you may no longer have to pay provisional tax in three amounts during the year, but just pay terminal tax if your residual income tax is under $5,000.

Low Value Assets

Threshold increases from $500 to $5,000 from 17 March 2020 – 16 March 2021. Then decreases to $1,000 from 17 March 2021. So, any fixed assets under $5,000 you bought after 17 March 2020 can be written off completely.

Use of Money Interest Remission

Inland Revenue can remit interest on late payment if the customers ability to make payment was significantly adversely affected by the COVID-19 outbreak, for payments due on or after 14 February. 

To be eligible for remittance of penalties and UOMI, customers must meet the following criteria: 

  • They have tax that is due on or after 14 February 2020 
  • Their ability to pay by the due date, either physically or financially, has been significantly affected by COVID-19
  • They will be expected to contact the Commissioner as soon as practicable to request relief and will also be required to pay the outstanding tax as soon as practicable

Inland Revenue considers the term “as soon as practicable” means that so long as the taxpayer applies for the relief at the earliest opportunity and agrees to an arrangement that will see the outstanding tax paid at the earliest opportunity, or will be paid over the most reasonable period given the taxpayer’s specific circumstances, the test will be met.  Even if you will be unable to pay the tax on time it is important to file the tax returns on time. 

IRD Policy Changes to be enacted

Greater flexibility for taxpayers in respect of statutory tax deadlines –  Inland Revenue will be given greater flexibility to modify timeframes or procedural requirements for taxpayers who are impacted by COVID-19.

  • Changes to the tax loss continuity rules – Moving from a continuity of ownership test of 51% to a ‘same or similar business’ test, this enables investors to buy into a company without it losing its’ losses
  • Measures to support commercial tenants and landlords – extending the timeframes required before landlords can cancel leases from 10 working days to 30 working days and extend the timeframe mortgagees can exercise their rights to sale or repossession.
  • Further business consultancy support – available through Canterbury Chamber of Commerce,
  • A tax loss carry-back scheme

Tax Loss Carry Back Scheme

A loss carry-back scheme has been included in a bill introduced the week of the 27th April 2020. It should enable a business to offset a loss in a particular tax year against a profit in a previous year and receive a refund of the tax paid in the previous year. 

This should provide cash to firms that are, or anticipate, being in loss.  We will know more once the legislation is passed this week.

Staff working from home  – Tax Free Reimbursements

IRD have made a determination that between 17 March to 17 September 2020, you can pay staff $5 per week for phone costs and $15 per week for other expenses with no evidence required. This will be deductible to the business and not taxable for the staff member.

Winter Energy Payment

The Winter Energy Payment has been doubled for the 2020 year. 

For eligible people it will be $900 for single people with no dependent children and $1,400 for couples and people with dependent children.

Tax Return Filing and Payments

If your business is unable to pay its taxes on time due to the impact of COVD 19, contact IRD and they will look to remit any penalties and interest.

But even if you can’t pay, you need to keep filing your tax returns. 

Please let us know if we can help in any way.

Regards

Liddell and Crook Team

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1. Who may instruct us

You confirm that you, and any other person you nominate in writing from time to time (provided we have acknowledged such nomination), are authorised to give us instructions and information on behalf of all persons we are acting for and to receive our advice and documents on their behalf. If we are acting for a business, and we receive conflicting advice, information or instructions from different persons, we may refer the matter to the board of directors, partners or proprietors (as applicable) and act only as requested by them.

2. You and your spouse/partner

We will advise you and your [spouse/partner] on the basis that you are a family unit with shared interests. We may deal with either of you and may discuss with either of you the affairs of the other. If you wish to change these arrangements, please let us know.

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From 1 October 2018, all New Zealand accounting practices became subject to New Zealand’s Anti-Money Laundering and Countering Financing of Terrorism Act 2009. Where we are required to conduct customer due diligence, this Act does not allow us to act, or continue to act, for our clients unless we have conducted that due diligence. Accordingly, we may be required to verify your identity for the purposes of the anti-money laundering laws. We may request from you such information as we require for these purposes and make searches of appropriate databases.

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You must provide us with all information necessary for dealing with your affairs including information which we reasonably request, in sufficient time to enable our services to be completed before any applicable deadline. We will rely on such information being true, correct and complete and will not audit the information [except to the extent we are specifically engaged to provide audit-related services]. You authorise us to approach such third parties as may be appropriate for information that we consider necessary to deal with your affairs. You must keep us informed on a timely basis of changes in your circumstances that may affect our services.

5. Qualifications on our services

To the extent our services involve the performance of services established by law, nothing in the engagement letter or these terms reduce our obligations under such law. You must not act on advice given by us on an earlier occasion without first confirming with us that the advice is still valid. Our services are limited exclusively to those you have engaged us to perform. Unless otherwise specified in the engagement letter, our services cannot be relied upon to disclose irregularities and errors, including fraud and other illegal acts, in your affairs. Neither an audit nor a review will be conducted and, accordingly, no assurance will be expressed. Where our engagement is recurring, we may amend our engagement letter and these terms where we consider it is necessary or appropriate to do so. If you do not accept such amendments, you must notify us promptly in which case you may terminate our engagement in accordance with section 18 below and those amendments will not apply prior to such termination.

6. Reliance on advice

We will endeavour to record all advice on important matters in writing. Advice given verbally is not intended to be relied upon unless confirmed in writing. If we provide verbal advice (for example, during a meeting or telephone conversation) that you wish to rely on, you must ask us to confirm the advice in writing.

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We are prohibited from providing you with investment or financial advice regulated under the Financial Markets Conduct Act 2013, as amended by the Financial Services Legislation Amendment Act 2019.

8. Professional obligations and confidentiality

We are required to comply with all applicable by-laws, rules, regulations, professional and ethical standards and guidelines of Chartered Accountants Australia and New Zealand and the New Zealand Institute of Chartered Accountants (NZICA). These requirements include the NZICA Code of Ethics, which among other things contains confidentiality requirements. In accordance with these requirements, we will not disclose information we obtain in the course of this engagement to other parties, without your express consent, except as required by:

  • laws and regulations (for example, disclosures required under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (including to a third party auditor) and as required by the Common Reporting Standard)
  • professional obligations including:
    • the provisions of the NZICA Code of Ethics that apply if we become aware of actual or potential ‘non-compliance with laws and regulations’ (NOCLAR). Where any such non-compliance poses substantial harm (such as adverse consequences to investors, creditors, employees or the public), we may be required to disclose the matter to an appropriate level of management or those charged with governance and/or an appropriate authority.
    • the provisions of the NZICA Rules and Professional Standards that subject us to practice review, trust account audits, investigations and disciplinary procedures. These rules require us to disclose to NZICA, its practice reviewers and/or its disciplinary bodies our files and workpapers including client information. In accepting this engagement, you acknowledge that, if requested, our files related to this engagement, may be made available to NZICA, its practice reviewers and/or its disciplinary bodies. Employees and contractors of NZICA are also bound by confidentiality under contract and by the NZICA Code of Ethics.

9. Conflicts of Interest

We will inform you if we become aware of any conflict of interest in our relationship with you (including between the various persons this engagement letter covers) or in our relationship with you and another client. Where conflicts are identified which cannot be managed in a way that protects your interests or you do not consent to the way in which we propose to manage the conflict then we will be unable to provide further services to some or all of the persons to whom this engagement applies. If this arises, we will inform you promptly. We may act for other clients whose interests are not the same as or are adverse to yours, subject to the obligations of conflicts of interest and confidentiality referred to above.

10. Fees and payment

Our fees will be charged on the basis set out in the engagement letter and have been set based on the level of skill, responsibility, importance and value of the advice, as well as the level of risk. If we have provided you with an estimate of our fees for any specific work, this is an estimate only and our actual fees may vary. We may provide a fixed fee for the provision of specific services. If it becomes apparent to us, due to unforeseen circumstances, that a fixed fee is inadequate, we may notify you of a revised figure and seek your agreement to it. Our fees are generally stated exclusive of GST which will be added to our invoice where it is chargeable. Any disbursements and expenses we incur in the course of performing our services will be added to our invoices where appropriate. Unless otherwise agreed to the contrary, our fees do not include the costs of any counsel, or other professionals or third parties engaged with your approval. We may also suspend our services or to cease to act for you on giving written notice if payment of any fees is unduly delayed. We intend to exercise these rights only where it is fair and reasonable to do so.

11. Lien

If permitted by law and not prohibited by professional standards or guidelines, we may exercise a lien over all materials or records in our possession relating to all engagements for you until all outstanding fees and disbursements are paid in full.

12. Disclosure permissions

In accepting this engagement, you provide us with your express consent to disclose your information to:

  • our service providers (see clause 22) or regulatory bodies to the extent required to perform our services in respect to this engagement;
  • our professional advisors or insurers to the extent required to protect our interests in respect to this engagement;
  • our external peer reviewer to the extent required to review this engagement.

We will take reasonable steps to ensure any such recipient (other than a regulatory body) keeps such information confidential on the same basis we maintain in respect to your information (see clause 8). We may retain your information during and after our engagement to comply with our legal requirements or as part of our regular IT back-up and archiving practices and also for professional reasons (e.g. to perform the work under this engagement or to comply with our professional and ethical obligations). We will continue to hold such information confidentially. We may mention that you are a client for promotional purposes.

In providing services to you, we access and utilise selected services and products from third parties that facilitate our ability to provide our services. Specific examples of this are cloud-based software like Xero, MYOB, FuseWorks, TMNZ, and Accountancy Insurance (Audit Shield), our email and collaboration platforms like Microsoft and batch mail house services. All of these services are provided to us to enable better service to you. In utilising these services your personal information is provided into these platforms or given to the service providers solely to enable us to undertake our services to you. Your personal information is not to be used by any of these providers for any other purpose than to facilitate our services we provide to you.

If you have any concern about our use of third party and cloud-based services, please speak to us. Depending on your concern, this may impact on our ability to provide the requested services to you.

In addition to the above, we may use your personal information, such as your address, or contact details or broad business profile, to provide you with the industry information or to introduce you to additional services we offer. As we have already been doing from time to time, we may send you written or electronic communications, or newsletters, or invitations to events etc. As has always been the case, if at any time you do not wish to receive this information you can contact us and advise us and we will not send you any additional information.

13. Privacy

We may collect, store, use and disclose your personal information for the purposes of providing the services described in the engagement letter to you and to comply with our obligations in section 9 above and in accordance with the disclosure exceptions outlined in section 8 above. We will comply with the Privacy Act 2020 when collecting, storing, using and sharing your personal information. Our Privacy Policy (available on our website) provides further details of our privacy practices and our obligations to you.

14. Ownership of materials

We own the copyright and all other intellectual property rights in everything we create in connection with this engagement. Unless we agree otherwise, anything we create in connection with this agreement may be used by you only for the purpose for which you have engaged us. All working papers prepared by us (in any form whatsoever, including physical and electronic) remain our property. We will retain these papers in accordance with our normal record keeping practices in accordance with our professional and legal obligations. If your affairs at some time in the future are handled by you or another accountant, we will make available such information regarding your affairs that is essential to enable you or your new accountant to perform the services we previously provided including any software subscription held by us. You agree we can use your logos and trademarks for the sole purpose of providing advice to you in connection with the engagement, unless you tell us otherwise.

15. Limitation of liability

To the maximum extent permitted by law, our maximum aggregate liability (including of all our directors, contractors and employees) under or in connection with this engagement letter or its subject matter is limited to $1,000,000. You agree not to bring any claim against any of our directors, contractors or employees in their personal capacity. To the maximum extent permitted by law, we are not liable to you for:

  • indirect, special or consequential losses or damages of any kind; or
  • liability arising due to the acts or omissions of any other person or circumstances outside our reasonable control, or your breach of these terms.

16. Limitation of third-party rights

Our advice and information is for your sole use, and we accept no responsibility to any third party, unless we have expressly agreed in the engagement letter that a specified third party may rely on our work.

17. Termination

Each of us may terminate this agreement by giving notice in writing to the other party except where a conflict of interest has arisen, you fail to cooperate with us, or we have reason to believe that you have provided us or any other person with misleading or factually inaccurate information, in which case we may terminate this agreement immediately. Termination will not affect any accrued rights.

18. Communication

You must advise of any changes to your contact details. We may send any communications to the last contact details you have provided. Unless you instruct us otherwise, we may, where appropriate, communicate with you and with third parties via email or by other electronic means. The recipient is responsible for virus checking emails and any attachments. There is a risk of non-receipt, delayed receipt, inadvertent misdirection or interception by third parties in any form of communication, whether electronic, postal or otherwise. We are not responsible for any such matters beyond our control.

19. Applicable Law

Our engagement is governed by New Zealand law. The New Zealand courts have non-exclusive jurisdiction in relation to any dispute between us.

20. Interpretation

If any provision of the engagement letter or these terms is void, that provision will be severed and the remainder will continue to apply. If there is any conflict between the engagement letter and these terms, these terms prevail.

21. Disputes and complaints

If you have any concerns about our costs or services, please speak to the person responsible for this engagement, who is identified in our engagement letter. To resolve your concerns we have policies and procedures in place to deal appropriately with complaints and will use best endeavours to resolve a complaint or dispute to the mutual satisfaction of the parties involved. We may require you to detail your complaint in writing to allow us to fully investigate any concerns that you raise.

22. Outsourcing

We may utilise third parties’ services, from time to time and as separately notified to you, to perform the services. In utilising these third-party services, we provide these third parties with access to your data to the extent this is required to perform the services. This requires information being sent to our service providers in accordance with our Privacy Policy.

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