The financial impact that COVID-19 has had and will continue to have on businesses is only just unfolding. While some businesses will find new opportunities in the current climate, there will be a significant number who will struggle. Those businesses that come out of this wounded but still alive will have taken early action through contingency planning and scenario analysis and have communicated to and consulted with key stakeholders including staff, customers, suppliers, lenders and shareholders. In this time of uncertainty, we want to reassure you that we will do our best to support both you and your business and provide you with the advice you need to make sure you are making the right financial decisions to ensure you address the immediate financial impacts on your business and ensure we help to facilitate your long-term business success.
UPDATE: The information in this article was based on information available as at the date of publication. There have been numerous updates from Government in relation to COVID-19 since.
The Government has announced a Wage Subsidy and Leave Payment for businesses impacted by COVID-19 and have released a Business Continuity Package with proposals relating to tax which will help businesses cope with COVID-19 that are anticipated to be fast-tracked into legislation prior to 1 April 2020. Further to this, a Business Finance Guarantee Scheme will be implemented for small and medium-sized businesses to protect jobs and support the economy through this time and banks have announced a major financial support package for home owners and businesses affected.
UPDATE: Since the date of publication, updates have been made to the criteria for applying for the Wage Subsidy, the Leave Payment can no longer be applied for and The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (No 8 of 2020) received the Royal assent on 25 March 2020.
As your trusted business advisors, we want to help you interpret what these mean for you if your business has been or will be negatively impacted by COVID-19.
UPDATE: Since the date of publication, various amendments have been made to the criteria for applying for the Wage Subsidy. Refer to the declaration required by Work and Income via the link below for the most up to date criteria:
https://www.workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html
Quick facts:
Our advice:
If your business has been significantly impacted by COVID-19, apply for a wage subsidy via these links:
Employer application https://services.workandincome.govt.nz/ess/employer_applications/new
Self-employed application https://services.workandincome.govt.nz/ess/trader_applications/new
Should you be contacted for further information to support your application, for example to prove a drop in revenue, please contact us so that we can work with you to provide prior year financial information or to show that your budgeted figures have been impacted. We would suggest getting your end of financial year information to us in a timely manner so that should you need these records for the year ended 31 March 2020 urgently, we can provide these on request.
You should also be keeping track of when customers are cancelling due to COVID-19 so that should you be required to provide supporting information, you have a record to provide which shows cancelled jobs and the value of lost revenue to prove predicted revenue. If you need help with forecasting, please get in touch with us.
UPDATE: The Leave Payment can no longer be applied for since the date this article was published.
Quick facts:
Our advice:
Do what you can to make sure your employees can work remotely but where this is not possible, give your employees warning early on that should self-isolation be required, it is by agreement that they can use their standard leave entitlements and let them know what the parameters of the COVID-19 leave payment are should this be necessary.
UPDATE: The COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (No 8 of 2020) received the Royal assent on 25 March 2020, subsequent to the date this article was published.
Quick facts:
Our advice:
Businesses may be able to start reducing their provisional tax payments for the 2020-21 income tax year immediately and should be in discussion with us to determine the effects of this on upcoming provisional tax payments if the Bill containing this measure is passed. Depreciation on commercial and industrial buildings increases expenses and therefore decreases taxable earnings. Reduced provisional tax payments would help business owners with cash flow in the near-term.
The broader economic effect this move would have is that commercial and industrial property investment could become a more desirable investment vehicle as the cost of such premises over time is reduced. There could become an opportunity to be realised here and if you are in a position where this could be a consideration, you should be talking to us to forecast what this looks like for you and your business. Further to this, increased business investment improves business confidence and this would have a flow on effect to bringing customers back through your doors.
Quick facts:
Our advice:
This proposal would allow the full cost of more low-value assets to be deducted in the year in which they are purchased, rather than spread the cost of the asset over its life. More deductions could result in lower taxable income in the short-term and therefore you may need to revisit your provisional tax payment obligations with us if this would have a material impact on your bottom line.
The aim of this proposal is to stimulate business purchases so that we keep each other in business. There is an opportunity for businesses to revisit their product pricing in order to appeal to this new threshold for savvy business owners looking to take advantage of this proposed change.
Quick facts:
Our advice:
Raising this threshold would mean you may not be required to pay provisional tax during the 2020-2021 income tax year and instead, if you have a 31 March balance date, your income tax would not fall due until 7th February 2022 for the year ended 31 March 2021. This will help short-term cash flow. If you anticipate your income dropping significantly for the 2021 income tax year, you should speak to us about the impact on your provisional tax payment obligations. The impacts of COVID-19 will be different on each business and we encourage you to explore your options with us so that we can help guide you to ensure your business continues to thrive in the long-term.
Quick facts:
Our advice:
Should this proposal be passed, if your business is significantly financially impacted by COVID-19 and you are unable to pay your taxes, then you should speak to us so that we can present your case to the Inland Revenue on your behalf as your tax agents.
The package also included additional measures to help support our most vulnerable:
Quick facts:
Our advice:
This may be a viable option to maintain cash flow for businesses impacted by COVID-19. The important fact to understand is that this money will need to be paid back so businesses will need to make sure they factor this into their cash flow forecasting projections.
Quick facts:
Our advice:
Check your retail bank’s website for specific financing options that are available to you during this time and discuss with us the most appropriate course of action to take for your business should you need to apply for these measures to ensure your long-term business success.
Strategic planning, debt control, budgeting, cash flow forecasting, tax planning, process optimisation and your online business presence will be vital over the coming months as your business navigates unchartered waters.
As we see it, some of the key action points that business owners need to consider are:
As your trusted business advisors, if you need help with any of the above, we can help you. Giles & Liew Chartered Accountants is committed to helping you find innovative ways to not only help your business survive but also to thrive. We offer a range of business advisory, process optimisation and digital transformation services to help business owners build successful businesses. If you simply want a sounding board to voice your business concerns or would like help with any of the aforementioned services, please get in touch with us.
Giles & Liew Chartered Accountants are committed to helping our clients through this time and to continuing business in an uninterrupted manner. There will be no disruption to phone and email and we will ensure that your statutory and compliance obligations continue to be met. We aim to give you the highest level of business advice we can to guide you and your business through this time. That being said, some necessary changes will need to be made to ensure we keep our team safe and able to assist you and your business.
We would prefer not to receive any paper records due to the risk of contamination and in the event our team is required to work remotely, we will not be checking our PO Box nor will there be anybody available at the office to receive your records. Accordingly, please email all signed documents back to us and make sure you send any end of year information and/or GST information to us through email. Please also expect more documents to be sent to you via email from us that may otherwise have come through the post.
Online bank feeds are the most efficient way for us to track your business performance throughout the year and to code or make changes to your bank transactions from an accounting perspective. If you are not already set up on an online accounting software package that gives us access to your bank feeds, please contact us to explore the available options.
If you need to send us bank transactions that are not already on an accounting software package, please contact your Client Manager to discuss how to best go about this. Downloading transactions from your internet banking and forwarding to us a digital extract is the best way to send this to us. Your Client Manager will advise you of the file type we need for your individual circumstances.
Client meetings can be held through video conference. Let us know if you would like to book a video meeting and we will arrange this.
Testing times can bring us all together and we want to assure you that we are here should you need to bounce ideas or explore your options. Our team of Business Advisors are experts in their field and our priority is to ensure that our clients are well-informed and able to make decisive decisions to ensure long-term business success. The actions you take now will determine what success looks like in the future.