Titled “Rebuilding Together”, unsurprisingly, any hopes of a transformational economic shift were quickly squashed when the Minister of Finance, Hon Grant Robertson, delivered Budget 2020 on Thursday 14 May 2020. The aim of Budget 2020 can be summed up in two words “Recover and Rebuild”, with the Government’s response to the COVID-19 pandemic dominating and the focus being on creating and sustaining employment.
The Government is establishing a $50 billion COVID-19 Response and Recovery Fund, which builds on top of the previously announced initial $12.1 billion COVID-19 Economic Response Package and New Zealand Upgrade Programme. New business support measures were announced, together with investment into infrastructure, housing development and construction, an environmental jobs package and a trades and apprentices package. Tax measures, of which we have become all too familiar with as per much of our previous coverage over the last six weeks, were not much of a focus of this year’s Budget.
In this article we identify some of the key points of Budget 2020 that we believe impact SMEs and invite you to discuss with us how your business may be impacted or opportunities that may have come to light as a result of the announcements.
New Business Support Measures
New support measures for COVID-19 affected businesses include:
A targeted extension of the Wage Subsidy Scheme
$3.2 billion has been committed to extending the Wage Subsidy Scheme by a further eight-week period, on top of the twelve-week period of the existing scheme, if your business can prove at least a 50% reduction in revenue in the 30 days prior to application compared to the closest period last year.
Qualifying employers are entitled to an extra 8 weeks of the subsidy per employee at the same weekly rate as the Wage Subsidy was paid. The Wage Subsidy Extension will be paid in a lump sum and applications are open from 10 June 2020 until 1 September 2020. You can’t apply for the Wage Subsidy Extension for an employee until their twelve-week Wage Subsidy has finished.
Certain obligations must be met when applying for the Wage Subsidy Extension such as agreeing to pass the subsidy on to your employees, retaining your employees for the entire duration of the subsidy, doing your best to pay employees at least 80% of their normal pay and taking active steps to mitigate the impact COVID-19 has on your business.
Talk to us first if you feel like this may be an avenue you wish to explore as a life-line for your business.
Loan scheme for Research and Development programmes
A $150 million short-term temporary loan scheme will be launched to incentivise businesses to continue research and development projects that may be at risk due to COVID-19. This loan scheme intertwines with the R&D loss tax credit regime that was announced earlier in the year. The loans will provide one-off finance, administered by Callaghan Innovation.
Further business support
An announced $216 million injection into New Zealand Trade and Enterprise is a welcome boost to assist export businesses.
A $10 million commitment to supporting small business e-commerce capabilities is also an exciting move. The $10 million injection won’t go far but recognises the need for moving business online. Being able to connect with customers in the current climate has been difficult for many businesses but innovative approaches by business owners to get their business up and running online have allowed some to survive and others to thrive. If you need help to move your business online, talk to us about how we can help you with your digital transformation journey.
Other Budget Announcements of Note
Where to from here?
$20 billion of the $50 billion COVID-19 Response and Recovery Fund remains unallocated so further announcements are sure to be on the horizon. Budget 2020, while not terribly exciting, does create some opportunities for those eager enough to respond. Talk to one of our Business Advisors about your current business strategy and how we can help with your business budgeting and cash flow forecast requirements to readjust your business strategy to the current economic climate.