COVID-19 update at Level 3
May 1, 2020
Congratulations on enduring the highest level of restrictions imposed as we lived under COVID-19 Level 4. Since the country moved to Level 3 at midnight on the 27th of April, we have experienced some changes.
Some businesses have been able to re-open and undertake limited trading, though still under restrictions. Other businesses have decided for various reasons to wait for the next level, which is to be decided in a couple of weeks. If you’re still uncertain which way you should go, don’t hesitate to contact us.
This update advises on two recent announcements made by the Government that you may have seen. Hopefully this recap clarifies and reminds of the contents.
Entitlement to reimburse employees for their costs of working from home
IRD has issued a Determination that allows employers to pay to employees $20/week as non-taxable exempt income to the recipient. This is to compensate employees for their additional use of phone and internet ($5/week) and other costs ($15/week). If limiting payments to these amounts, no documentation or further information is required.
Employers do not have to apply this Determination and can calculate tax-free allowance and reimbursement amounts based on their own reasonable estimates or actual employee costs. Documentation of the amounts and calculations will be required if they exceed the above amounts.
The period when this applies is limited to between the 17th of March and the 17th of September 2020 (29 weeks).
In addition, to recognise wear and tear on home facilities, the Determination allows for a one-off payment of $400 in a simplified documentation manner, essentially an email from employee to employer.
The amounts in the Determination require the employer to pay the employee, as it is not something an employee can claim on their own. If the employer does not have the ability to make payment, for instance while the business has been shut, then there is no claim. It is not required to be provided.
Self-employed and contractors can also use these amounts for their claims, though you’re likely already claiming these costs even in normal times.
Government Loan Scheme
In a surprising, low-key (some say accidental) basis the Government has also provided for a loan scheme for small and medium sized businesses.
Details of this loan scheme are still sparse, but it will allow most companies to borrow $10,000 plus an additional $1800 for each full-time employee they have. The loans will be free of interest if they are paid back within the year. Repayment will not be required in the first two years.
IRD, which will administer the loans (and from where applications are to be made through myIR) will also have the scope, it is believed, to write-off the loans. The scheme is open to all businesses as was the wages subsidy, as long as the business can demonstrate it is viable.
Applications are expected to open on the 12th of May. More information on the loan, including eligibility criteria and a calculator to determine the amount a business can borrow, is expected to be available from IRD on its website next week. The scheme is in part recognising banks had not met the lending expectations of businesses or the Government.
As more updates become available next week, we can let you know and help decide if you should apply.
Contact us today for your no-obligation consultation.