Further COVID-19 relief available for SMEs

Relief is now available for small and medium sized enterprises (“SMEs”) whose revenue has been affected by the recent COVID-19 Alert Level hikes (from Alert Level 1 to Level 2 for most of the country) during February 2021, with applications for grants and subsidies having recently opened on the Inland Revenue and Work and Income websites.

Resurgence Support Payments

Businesses that have experienced (or anticipate experiencing) a 30% decline in revenue over any consecutive 7 day period during the period of the Alert level hike, compared with a 7 day period in the six weeks immediately prior to the Alert Level hike, are eligible for a resurgence support payment (“RSP”) of up to $21,500. The RSP is not a loan, but must be used to cover employee wages and other fixed costs.

Eligible businesses are able to claim the lesser of:

• $1,500 plus $400 per employee (up to a maximum of 50 employees); or

• 4 times the actual revenue decline experienced (i.e. in the case of low revenue businesses).

Sole traders can receive a payment of up to $1,900. Businesses with greater than 50 employees may also apply. Companies or organisations within a group are treated as one company or organisation for the purpose of assessing eligibility.

Applications can be made online via the MyIR portal. Inland Revenue have developed a revenue calculator which can be found here. Seasonal businesses are able to calculate their revenue drop based on a comparison from a prior year.

Applications in respect of the Alert Level increase from 14 to 21 February 2021 close on 22 March 2021.

Applications in respect of the most recent Alert Level increase from 28 February to 7 March 2021 will close one month after the entire country returns to Alert Level 1.

Businesses should note that the RSP is available for each Alert Level increase and that a separate application is required in each instance. Should further increases in Alert Level occur for a period of 7 days or more, the Government has signalled that further relief will be available.

Receiving any other Government COVID-19 support does not affect eligibility for the RSP. Further information can be found on the Inland Revenue website.

Wage Subsidy March 2021

Applications for the Wage Subsidy March 2021 scheme opened on 4 March 2021 with the first payments commencing on 8 March 2021.

Any employer which has experienced a 40% decline in revenue over a consecutive 14 day period between 28 February 2021 and 21 March 2021, compared with a consecutive 14 day period between 4 January 2021 and 14 February 2021, is able to make application via the Work and Income website. Eligible employers are able to apply for $585.80 per week per full time employee (or $350 per part-time employee, working less than 20 hours per week) for any period in respect of which the eligibility requirements are satisfied. Eligible self-employed individuals are able to claim similar amounts.

Employers must be able to show that the decline in revenue is attributable to the most recent hike in Alert Level (not COVID-19 in general). In addition, all applicants must declare that they have taken active steps to mitigate the revenue decline attributable to the Alert Level hike (e.g. by drawing from cash reserves, making an insurance claim, or proactively engaging with their bank). The full declaration required to be completed can be found here.

Importantly, employers must agree that they will retain the employees in respect of which the subsidy is applied for, for the period of payment of wage subsidy and undertake to pay all employees at least 80% of their wages for that same period.

There are also rules against double counting, with any payments received by the organisation in respect of the Short Term Absence Payment (which provides relief in respect of payments made to employees who are unable to work from home due to COVID-19) and payments received under the Leave Support Scheme (which provides relief in respect of payments to employees who are in an enforced period of absence due to COVID-19) precluding the employer from applying for further wage subsidy relief in respect of that same employee, for that same period.

The first payments commenced on 8 March 2021.

Further information can be found on the Work and Income website.

Calculating revenue drop

Inland Revenue has provided guidance about the calculation of revenue decline in the context of the RSP. Standard accounting principles relating to income recognition apply (i.e. for a cashflow business, such as a restaurant, this is likely to be the daily takings; for a business that invoices clients, this will be the activities the business carries out that would entitle it to bill or invoice either immediately or at a later date).

In calculating the actual or forecast decline in revenue for both the RSP and the Wage Subsidy March 2021, businesses and employers should note that the following are excluded for the purpose of the calculation:

• payments on capital account and certain grants; and

• income that is received passively – such as interest and dividends, and all forms of residential and commercial rent.

Certain “pre-revenue” businesses will be eligible for the RSP if they have experienced a 30% decline in capital raising ability (provided the other eligibility criteria have been satisfied, such as the entity having been in business for more than six months).

Businesses and employers claiming either or both of the RSP or the Wage Subsidy March 2021 must keep detailed records of calculations, including:

• dates of the affected revenue period and comparison period;
• amount of revenue earned in each period; and
• how the revenue drop has been calculated.

Other relief available

Businesses affected by COVID-19 are also able to make use of the Business Finance Guarantee Scheme and the Small Business Cashflow Scheme.

If you need assistance with assessing the Government COVID-19 support available to your business please contact Jaesen, Jono or Dave.