• Extra 40,000 businesses to be eligible for wage subsidy extension
• Small business cashflow support application period extended
The Government is today announcing further support for businesses that continue to be affected by the global COVID-19 pandemic, as the broader economy becomes one of the most open in the world following the success of New Zealand’s public health efforts.
A change in criteria for the extended wage subsidy scheme means an extra 40,000 businesses will be eligible. After feedback from businesses, the Government has taken the decision to change the required revenue drop threshold from 50% to 40%. Up to 230,000 businesses are now forecast be eligible for the new 8-week scheme from 10 June, covering up to 910,000 workers.
Small businesses are also being given more time to apply for the Small Business Cashflow Loan Scheme, with the application date being extended from 12 June to 24 July.
Finance Minister Grant Robertson said the changes show the Government is working with the business community to put considerable support in place to protect jobs and incomes during the 1-in-100 year global economic shock caused by COVID-19.
“We moved quickly to put the wage subsidy in place to cushion the blow. We’ve also shown we will move quickly to make changes so support is targeted to where it is needed most, based on feedback from our regular engagement with the business community.
“While many New Zealanders are now back at work and our economy is one of the most open in the world, there are businesses that will feel the impact of this global pandemic for longer. The tourism, retail and hospitality sectors will in particular be supported by the extended wage subsidy and cashflow support.”
Carmel Sepuloni said the wage subsidy was successfully protecting jobs and giving businesses the ability to stay connected to their workers as the economy reopened. The scheme has paid out $10.997 billion to date, covering 1.66 million jobs.
“Nearly two thirds of businesses surveyed said the wage subsidy meant they were better able to use other cashflow for non-staff overheads, like commercial rent. About 89% said the wage subsidy will help them keep operating for the foreseeable future, while only 6% of those surveyed have indicated they are considering redundancies in the next few months.”
Stuart Nash said the extension to the Small Business Cashflow Loan Scheme recognised that many businesses were still planning for the future as the economy opened up more quickly than expected following the success of New Zealand’s public health response.
“The high level of demand we’ve seen for these interest-free loans to date shows we made the right decision to support SMEs with direct lending from the Government, through IRD. Extending the application date will give business owners the confidence that support is available if needed as the economy opens up.”
To date, more than $1.18 billion has been disbursed to more than 70,000 small businesses under the cashflow scheme. The loans are interest-free if repaid within a year. Businesses have five years to pay the loans off, with no repayments required during the first two years.
The changes to the extended wage subsidy scheme mean it is now forecast to provide between $2.6 billion and $3.9 billion of support to businesses to help them with their wage bills, up from a top estimate of $3.2 billion under the old threshold. This will be funded through the COVID Response and Recovery Fund.
The Government has also amended the revenue test under the extended scheme so that the business must have a revenue loss of at least 40% for a 30-day period in the 40 days immediately prior to the application date (but beginning no earlier than 10 May 2020) versus the nearest comparable period last year.
The wage subsidy and small business cashflow scheme are part of the extensive support the Government has made available for businesses, which includes:
• The $11 billion wage subsidy and $3.9 billion extended wage subsidy
• The $5.2 billion Small Business Cashflow Loan Scheme
• $3.1 billion for business tax refunds through the loss carry-back scheme
• $2.8 billion for building depreciation tax deductions and other tax measures
• The $6.25 billion Business Finance Guarantee
• Commercial rent support, including $40 million to cover arbitration costs
• The $400 million initial support for the Tourism sector
• A $600 million aviation support package
• Funding for business advice through the Regional Business Partner Network
• A $400 million package to encourage R&D