On 17 March 2020, in response to the economic impact of COVID-19, the New Zealand Government released its NZ$12.1 billion (US$6.8 billion) Business Continuity Package (the Package). The Package is significant, representing 4% of New Zealand’s GDP.1
The measures announced will provide financial relief to both businesses through tax measures, and at-risk employees through a financial safety net. The Government has also announced significantly increased funding for the health sector to strengthen health services to fight and contain COVID-19.
This Alert summarizes the key highlights of the Package.
1. Tax and business cashflow measures
The Government announced changes to the tax rules with the Package, which will be expanded on in a new Bill to be introduced shortly:
2. Wage subsidization
The Government will be administering wage subsidies for employers of affected businesses who may otherwise face difficulties retaining their staff.
To qualify, businesses must be able to show a 30% decline in revenue due to COVID-19, month-on-month for any month between January and June 2020 (compared to last year). Employers are expected to approach their banks for financial assistance in the first instance.
Employers eligible to receive the subsidy will receive a lump-sum payment of the equivalent of NZ$585/week for each eligible full-time employee, and NZ$350/week for part-time employees. The subsidy will be capped at 12 weeks and NZ$150,000 per businesses. Over a 12-week period the full subsidy equates to roughly 21 full-time employees per week. The Government is undertaking further work to understand how best to provide support on a case by case basis for larger employers, for whom the wage subsidy will provide more limited financial relief.
The subsidy will be administered by the Ministry of Social Development and will also be available for those who are self-employed and working as contractors.
3. Supporting self-isolation with increased sick leave payments
Increases in sick-leave payments have been announced to incentivize self-isolation (being central to the New Zealand containment strategy).
Additional payments will be available for employees required to self-isolate, or care for others in self-isolation. Eligibility for these additional payments is open to all employees, who are not able to work remotely and who are required to self-isolate. These payments will not be available for persons required to self-isolate due to travel taken after 16 March 2020.
To qualify, employers will need to register to receive support based on the number of impacted employees, give undertakings that they will endeavor to employ at 80% of full income the affected employees, and include a declaration of steps taken to find independent financial support. False declarations would be treated as “fraud,” as qualified in the announcement. The first payments will be made within five days of application.
4. Expansion of welfare support
The Government has announced three main changes in the Package to bolster welfare spending and support vulnerable individuals:
We are expecting legislation to enact the above changes will be progressed through Parliament in the coming days. The Government has suggested further operative details on the Package will be announced later this week, and a second wave of longer-term financial support to be announced in the May Budget this year.
1. Gross Domestic Product.
2. Use-of-Money Interest.
For additional information with respect to this Alert, please contact the following: