Finance Minister Grant Robertson today outlined a $12.1 billion package to support New Zealanders and their jobs from the global impact of COVID-19.

“This package is one of the largest in the world on a per capita basis. It represents 4.0% of GDP and is more than the total of all three Budgets’ new operating spending in this term of Government put together.

“The global economic impact of COVID-19 on New Zealand’s economy is going to be significant, so we are acting now to soften that impact.

“Our first priority is the health and wellbeing of our people. The global spread of the virus has also disrupted economies across the world costing the jobs and livelihoods of countless families.

“We don’t yet know what the full impact on New Zealand’s economy will be, however we do know it will cost us jobs and have a significant impact on business. We are moving quickly to help people stay in work and reduce the blow for business,” Grant Robertson says.

The $12.1 billion package includes:

• Initial $500 million boost for health
• $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today
• $126 million in COVID-19 leave and self-isolation support
• $2.8 billion income support package for our most vulnerable, including a permanent $25 per week benefit increase and a doubling of the Winter Energy Payment for 2020
• $100 million redeployment package
• $2.8 billion in business tax changes to free up cashflow, including a provisional tax threshold lift, the reinstatement of building depreciation and writing off interest on the late payment of tax
• $600 million initial aviation support package

This cash injection is on top of the $12 billion New Zealand Upgrade Programme that was announced in January.

“I want to make it clear that this is not a one-off package, it is just the beginning. As we go through this crisis towards economic recovery the Government will be constantly monitoring the situation and adjusting its response. As with every action we have taken we will be constantly reviewing every measure to ensure it is getting to the people and businesses that need it the most,” Grant Robertson said.

“We are actively discussing working capital support for small and medium businesses and tailor-made support for larger and complex businesses.

“There are four guiding principles for our response. Any measures the Government takes must be timely, fiscally sustainable, targeted to those who need it, and proportionate to the level of the economic shock.

“The investments we’re announcing today are possible because of our careful and responsible management of the Government’s books.

“By running surpluses and keeping debt under control, New Zealand is in one of the strongest positions of any country to respond strongly through our public health and economic stimulus packages,” Grant Robertson said.

***To apply for assistance via wage subsidy or leave payment:

Apply as an employer HERE

If self-employed/contractor, apply HERE

DETAILS

WAGE SUBSIDY SCHEME FACTSHEET

Overview: Wage subsidies will be available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result. The scheme will be open to sole traders and the self-employed as well as firms.

Amount of support: $585.80 per week for a full time employee (20 hrs or more) or $350.00 per week for a part time employee (less than 20 hrs). The payment will be made as a lump sum for a period covering 12 weeks. This means employers will receive a payment of $7,029.60 for a full time employee and $4,200 for a part time employee. The maximum amount any one employer can receive is $150,000.

Scale of disruption: Employers must have suffered, or are projected to suffer at least a 30% decline in revenue compared to last year for any month between January 2020 and the end of the scheme in June 2020. Applications can also be made on the basis of forecast revenue loss within the period of the scheme.

Undertakings from the Employer: Some of the key undertakings are:

• Employers will need to declare that, on their best endeavours, they will continue to employ the affected employees at a minimum of 80% of their income for the duration of the subsidy period. This is the equivalent of keeping people working 4 out of 5 days of the week.

• Employers must also have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank/financial advisor) and sign a declaration form to that effect.

Employers can apply to MSD for the subsidy: Employers can apply from today. Applications can be made through an online portal on the Work and Income website www.workandincome.govt.nz. MSD will aim to make first payments no later than five working days from when applications are received.

Duration of the scheme: Applications can be made from today (17 March) for the next 12 weeks

Estimated total cost: Approximately $5.1 billion 

Example 1: Forestry contracting gang use wage subsidy 

A six person forestry contracting gang in Gisborne has been severely affected by the COVID-19 impact on logging exports and their revenue is down 90 per cent. Their Employer applies for the targeted wage subsidy. The Employer receives $42,117 as a lump sum payment and is able to provide just over $7,000 gross (before tax) to each of the employees across the next 12 weeks. 

Example 2: Tourism operator

A tourism operator in Queenstown, with 20 permanent part time employees and 40 casuals, is affected by the decrease in international visitors. Their income is down 50% from the same period last year, forward bookings over the next two months are down 30%, and the casual workforce has already been released.

The Employer receives $84,000 as a lump sum, and uses the subsidy to keep paying all part time staff their existing (current) income over the next 12 weeks.

More information on the wage subsidy scheme, including how to apply, and other support for businesses can be found at www.govt.nz/coronavirus, and www.business.govt.nz.

BUSINESS CASHFLOW AND TAX MEASURE FACTSHEET

Reintroducing depreciation on commercial and industrial buildings

Overview: Depreciation deductions will be reintroduced for new and existing industrial and commercial buildings, including hotels and motels. This will help support businesses with cashflow in the near-term and assist with the broader economic recovery by stimulating business investment in new and existing buildings. 

Reinstating building depreciation will support longer-term economic productivity and macroeconomic objectives by:

• encouraging investment in business premises and decreasing the cost of such premises over time;

• improving business confidence; and

• enabling the capital cost of seismic strengthening of buildings to be depreciated. 

Estimated total cost: $2.1 billion over the current forecast period (until 2023/24)

Payments able to be applied for, and received from: A Bill containing this measure will be introduced shortly. The law will allow owners of commercial and industrial buildings (including hotels and motels) to start reducing their provisional tax payments for the 2020-21 income year immediately. There is no application process as the increased deduction will be available as part of normal tax filing processes.

Design Decisions

Sectors - All sectors eligible

Regions - All regions eligible

Disruption to business - None

Scale - 2% Diminishing Value 

Duration of support - Permanent 

Duration of the scheme - Permanent change

Other pre-qualification - Own a commercial or industrial building

Administering agency - Inland Revenue

Examples:

Jane owns (through her company) a motel building with a tax book value of $3m. Under current tax law it is not depreciated. From 2021/22 Jane is able to depreciate the building at a rate of 2%, which means her company can claim a deduction of $60,000 in the 2021/22 year, reducing her taxable profit. This results in her company having $16,800 less tax to pay that year (as the company tax rate is 28%).

COVID-19 LEAVE AND SELF-ISOLATION SUPPORT FACTSHEET

Overview: Workers and businesses have responsibilities to prevent the spread of COVID-19. The purpose of the COVID-19 leave and self-isolation scheme is to support workers financially to self-isolate, or while ill with COVID-19, where this is required so that all businesses and workers can do the right thing.

The COVID-19 leave payment scheme will provide support (through employers/to sole traders and the self-employed) for those people unable to work who are in self-isolation, are sick with COVID-19, or caring for others with COVID-19. The payments will be $585.80 per week for full time and $350 per week for part time workers. 

The payment does not affect any paid leave entitlements that are owed and is available even if an employee is on paid leave for part of the period. It is not available to those who can work from home during the period of self-isolation, and who can be paid normally by their employer. 

Estimated total cost: $126.5 million across the 8 weeks, reflecting an estimated uptake by 27,000 workers every two weeks for the next 8 weeks. This represents a scenario where:

If the numbers of people taking up the scheme were only to average 10,000 over the 8 week period, the cost could fall to $46.8 million. The numbers could also be higher – this is not a prediction of the prevalence of self-isolation or sickness. It depends on how many people will need to self-isolate or will be sick with COVID-19, and how many in self-isolation will be able to work normally from home.

Payments able to be applied for and received from: Employers will apply for the leave on behalf of any employee who is self-isolating or sick. Payments can be backdated to 17 March, 2020.

Further details: Affected full time workers (those who work more than 20 hours per week) will receive $585.80 per week, and part time workers (20 hours or less) $350 per week – the same amount as under the wage subsidy scheme.

The payment is made by MSD to employers, who will then be required to pass it on to the affected employee. MSD will pay on a fortnightly basis once it receives an application.

Other key parameters of the scheme are:

• Eligibility is open to all employees legally working in New Zealand (through their employers), the self-employed, and contractors.

• Eligibility will only be for workers who are not able to work from home.

• The entitlement is for:

o Those who self-isolate in accordance with public health guidance and who register with Healthline;

o Those who are ill with COVID-19;

o Those who cannot work because they are caring for a dependent in either of these circumstances.

• Those who leave New Zealand to travel overseas from 16 March, 2020 will not be eligible for this payment for self-isolation on their return.

Workers taking sick leave before 17 March, 2020 can only access the scheme for time spent on sick leave from 17 March, 2020. It will not be accessible for those who have travelled overseas since 16 March, 2020.

Example

John Smith, a full-time plumber working for EasyFlow Pipes Ltd, arrived back from a three-week holiday in Sydney on Tuesday, March 17. Despite feeling well, the Government’s self-isolation restrictions meant John had to self-isolate for 14 days.

John had already used his mandatory sick days earlier this year and his employer was not able to cover his wage for 14 days while he was off work. His employer applied to MSD for the sick leave support for John and received a lump sum payment of $1,171.60 to pass on to John for the two weeks he is in self isolation.

More information on the sick leave scheme, including how to apply, and other support for businesses can be found at www.govt.nz/coronavirus, and www.business.govt.nz.

INCOME SUPPORT FACTSHEET

Overview: There are three main changes to welfare settings.

• Firstly, main benefits will rise by $25 per week. These changes will come into effect on 1 April 2020 and are permanent. 
• Secondly, to support beneficiaries and superannuitants, the rate of Winter Energy Payment will double in 2020. This change is temporary.
• Thirdly, from 1 July 2020, working families with children who are not receiving a main benefit and have some level of employment income each week will no longer have to satisfy the hours test to receive the In Work Tax Credit.

Estimated total cost: $2.8 billion over the next four years.

This includes: 

• $480 million additional spend on the Winter Energy Payment in 2020
• $2.4 billion over the next four years to increase main benefits

These costings do not include the removal of the hours test, however is estimated to cost approx. $32 million per annum. 

Timing for additional entitlements:

• Recipients will not have to do anything to receive these additional entitlements. The additional support will be calculated automatically. 
• Main benefits will increase on 1 April 2020 in line with wage growth (indexation) AND then by an additional $25 per week.
• Winter Energy Payment will start on 1 May 2020 and be paid at double the current rate for 2020 only. The rates for 2020 will be $40.91 per week (single people) and $63.64 per week (couples or people with dependents).
• From 1 July 2020, working families will no longer need to be “normally” working at least 20 hours a week (sole parents) or 30 hours a week (couples with children) to be eligible for the IWTC.  

Changes to the In Work Tax Credit

The In Work Tax Credit is an income-tested cash payment of $72.50pw ($3,770 per year) to working families with children.

Under current settings, to be eligible families must be “normally” working at least 20 hours a week (sole parents) or 30 hours a week (couples).

Removing the hours test will extend eligibility for the IWTC to all families who are not receiving a main benefit and have some level of employment income each week. This is an important change as people may face a reduction of, or variable hours, in the wake of the COVID-19. Around 19,000 low-income families would benefit from this change.

Example: A is a sole parent who works 20 hours per week normally, earning income, and not receiving a main benefit. Because of this, A is eligible to receive the IWTC. However, in light of COVID-19, A’s hours may be reduced to 10 hours per week. Because of this, she would no longer be entitled to the IWTC. This change will allow A to continue to receive the IWTC in these circumstances.