In this week’s edition:
The government finally moving on commercial leases code of conduct see down towards the bottom.
Negative Interest Rates – stop asking me that question 😊 (like the banks going to pay you to have a mortgage… that’s not happening), I’ll get an answer for you next week, with the concept of Quantitative Easing Covered.
You must look at the NZTE grant funding section and see if you can register to get grants to help with fees for professional help.
The Wage Subsidy has been changed and extended today, I will check and clear that next week!
Tax Update and Tax Back Notes
- We are still working on these and will have a better idea once the legislation is updated and digested in the next week.
- Here is the link to the basic notes on tax changes and such which we will comment on soon. https://www.ird.govt.nz/Updates/News-Folder/covid19-business-changes
- Next Week: Mr Mark Davies our brainy Smurf tax guru in Nelson will be throwing some Tax grenades and we will discuss some of the merits of these below:
- Perhaps what we need (in fact should have happened by now) are some incentives around certain behaviours for business owners – essentially they need to be encouraged to invest now that they have probably had a chance to think about how their businesses are set up. So some opportunities in tax policy are including:
- Re-indexation (thresholds) re personal tax rates and dropping of headline company, trust, and personal tax rates. Backdated to 1 April.
- Big increase in small asset write off – probably to $5,000, Backdate to 1 April.
- Probably 50% depreciation loading re new asset purchases, from 2021 income year.
- Proper and prioritised investment in communication technologies – now we all realise how important world class connectivity is, and NZ does not have it!!
- That CGT is not going to happen – it would make things worse and the Govt is worried about the election anyway (Logan and Mark are going to bet on this).
- Govt needs to step in and help tenants, not just say ‘ go see your landlord’. Stop Passing the buck because it’s too hard… (Refer to the Fair Commercial Leasing).
- Ease of implementation may rule out GST rate changes and removing GST from some things, and incentives for certain industries/sectors, but consider.
- Extend the loss carry back for multiple years.
- Joint spousal income tax assessments.
Covid-19 Wage Subsidy Clickbait and Fraud – (perhaps somewhat tongue in cheek)
- The Govt have extended the scheme today, we will update the notes on that early next week.
- All the Govt really lead with for the last week on the business front (well finished with on last Friday) was the sensation created around the fact they found some fraud and integrity issues in the Wage Scheme. We still think they did a great job in this space overall!
- Fraud and stupidity was always going to be a factor when you pump $10 Billion dollars out the door very quickly, opportunists and thieves will fill voids. The government have a team of 100 Auditors reviewing the files relating to the wage subsidy applications. Evidently 800 complaints were laid in nine days with the Department of Labour, relating to Fraud, Redundancy, Forced Leave and the like. 1,300 applicants voluntarily sent back $16.2m. Audits have resulted in 56 businesses being asked to return some or all of the subsidy to the tune of a further $1.25m. MSD will review Criminal Proceedings, with those convicted facing three to seven years jail.
- If you know anyone really stupid or dumb (… or are just asking for a friend) in this space Peter Tomlinson is good criminal barrister! You can google him if needed.
- Look to be clear the Govt will have the ability for the most part to track and trace this, the applications had good detail in them and there is IRD matching, as well as publication of the businesses taking the subsidy. Inherently in this space we think the Govt have done bloody well, and they will keep the dishonesty and fraud to a minimum, but it will be there and that’s that.
- There has been some moral hand wringing and raised eyebrows about who’s taken the Wage Subsidy v who has not, if you feel nosey plug some names into the public link, we put some of the receivers and liquidation practices in and they claimed for it (does that mean we are going to be ok then 😊 ?)
- The Trade Unions are calling for the program to be extended, beyond 12 weeks, so keep an eye out.
- The Govt wanted employees and employers bonded during lockdown and the Wage Subsidy was a way to achieve it. It will be six months or more until some business, know where they are relative to the 30% revenue drop. Therefore it’s a bit early to be calling employers on taking it now, if they have taken it and preserved it and are still paying the employees at least 80% out of cash flow reserves, we think that is ok. The whole idea was to smooth things out, we expect some businesses may have to adjust some of it back.
- We think our friend Tony Black was a tad unwise talking to the papers the way he did about the subsidy, but if you read the article in full it’s not actually that bad, he’s going to be probably 30% down, but says he has reserves to pay wages and will hold the subsidy in reserve. The key driver for the subsidy is not the funds in the bank but revenue. Mr Black is a little misquoted, but we would imagine he will be getting a please shut up call from his accountant and lawyer today. https://www.stuff.co.nz/business/121254612/coronavirus-business-owner-pockets-150000-from-government-wage-subsidy-and-hes-not-paying-it-back
May the 14th! Budget Day!
- Block this date out in the diary, it’s going to be the biggest most important budget of your life!!!, Grant Robertson has promised this will be the cornerstone of the third wave of the NZ economic plan in response to dealing with Covid.
- In what he called the “Reset and Rebuild” (sounds like Wayne Barnes setting a scrum doesn’t it?), saying the announcements will be “Eye Watering compared to what countries like ourselves are used to spending” … this means it’s going to rain cash surely? 😊
- Our pick here seems to be the govt wants to stimulate support small local businesses /shop local/spend local, that’s definitely the theme of forums and commentary as well. The govt had not wanted to drive consumer activity and spending during lockdown, but by budget time they clearly expect people to be out and about consuming a little bit (locally before regionally)! You should make a note here to be careful in your interpretation of “Local”, a lot of great local businesses import ingredients and products to sell and they employee a lot of people, don’t get to zealot like, on product labels!
- We have been a tad impatient in the last few weeks on progress relating Business and Economic Support and Recovery Programs being announced, our gut feeling was that Australia were a long way ahead in its architecture. We are just wondering if the various announcements and packages are going to be a bit dry until the 14th of May, to some degree we expect the government in election year want to present “the package”, can’t blame them for trying, (we’ll criticise them though)…
- Robertson is clear though, he is saying loudly, there is more support and Stimulus to come but can business wait?
- There is talk of a payment to everyone, it’s not ruled out so who knows, you might all get $1,500 in the lolly jar, or a targeted one off tax rebate later in the cycle.
- Unions and others are calling for the Wage Subsidy to be extended beyond 30 June, again sit and wait, we will see.
- They might look at targeted GST or Tax cash back as well.
They may lift the student loan debt repayment threshold, which would give those paying off this debt a bit more cash.
- They may look at specific targets for Foreign Student Educators, Tourism and Hospitality Sectors, there are a range of options here for them, including help with Hibernation of Businesses as well.
- Courses and Education Fees for Universities and Accredited Courses may be free or subsidised for retraining or upskilling (Fees Free expansion).
- If NZ is Covid free for example it might be quite attractive for overseas students to come here and do 14 days quarantine for a tertiary education over some of the worlds other Ivy League colleges, for instance in Covid infested cities (ok I know, we probably can’t quarantine huge number easily, and online learning is ramping up… but) .
- Phil Twyfords indication that there will be no reprioritisation of spending away from roading, and that the Govt are not considering changing any of the existing announced projects. He stated the construction industry is going to get more shovel ready projects on top of existing ones to create jobs and certainty regarding fully funded infrastructure projects. This is interesting and space worth watching (Phil is not noted for his listening skills, or implementation success either)!
- The possible pain on exiting through the gift shop (you know what that feels like). RBNZ Governor Adrian Orr is remarkably open to all sorts of leavers, even as far as considering directly monetising government debt (creating new money via the computer system and giving it to the govt to spend, like a slot machine but no tokens). He also noted issues with fiscal policy becoming blurred, that it can lead to high inflation and other taxes down the road. These are your favourite ones Increased Top Marginal Tax Rates, Wealth Tax, Inheritance Tax and your favourite Capital Gains Tax… In fact if we don’t see a decent retrenchment the share market and property market across the board that one is almost a certainty, (before you gun me down in a hail of bullets I’m just presenting options and issues, not facts). Orr is just saying what you get or take now is to be met with a required equal sacrifice later.
NZTE – Cash Grant Funding for some of our costs for work for clients, (contact a team member if you are interested!!!!)
- Jacal have now been approved to offer both a business continuity plan and or finance and cashflow management for our clients as part of the wider government $12.1B fund.
- If you apply and are approved for this grant, you are able to get up to $1,000 to use towards payment to us. Effectively this equates to 4 hours at $250 per hour.
- This is something you may want take advantage of to access services to help you plan and to make informed decisions about your business for the future.
- Please note the criteria our clients need to meet to apply for the grant:
- You are an employer;
- Your business was generally sound prior to the COVID-19 challenge and with the right support should survive to provide jobs and income in the future;
- You do need the financial support from RBPN; and
- The COVID-19 crisis is affecting your business – demonstrable evidence will be required.
Do you have NZ Personal or Company Tax Residency issues as a result of Covid? (Might be boring skip it, might be important so don’t)
On 22 April 2020, Inland Revenue issued the following statement relating to the unintended and unprecedented consequences for the tax residence rules caused by the COVID-19 emergency. This is particularly relevant to people stranded in New Zealand who were not intending to be a tax resident. The current location of directors, employees and individuals also has an impact on businesses. Note this is at the IRD discretion and it is a temporary measure.
- Individuals: In normal circumstances, an individual will become tax resident in New Zealand if he/she is personally present in New Zealand for more than 183 days in total in a 12-month period. The COVID-19 emergency could result in individuals having to stay in New Zealand longer than 183 days. An individual will not become tax resident in New Zealand under the day-test just because he/she is stranded in New Zealand. The extra days when a person was unable to leave will be disregarded if a person leaves New Zealand within a reasonable time after they are no longer practically restricted in travelling.
- Schedular payments and non-resident contractors: The 92-day test excludes some payments from being schedular payments. These are the payments for services provided by a non-resident contractor who has full relief from tax under a double tax agreement and is present in New Zealand for 92 or fewer days in a 12-month period. The payment is not a schedular payment because of the short-term period that the contractor is present in New Zealand. In these circumstances, the withholding tax obligations in the PAYE rules will not apply. Any extra days when a person was unable to leave New Zealand because of the COVID-19 emergency will be disregarded if the person leaves or returns to their country within a reasonable time after they are no longer restricted in travelling.
- Company residence: The present emergency will not cause corporate taxpayers to be tax resident because the directors of a company are confined or stranded in New Zealand. The law allows a factual consideration of how a company is managed in reality. The fact that the directors are stranded in New Zealand under the present emergency does not change where the real business of a company is carried on. The occasional exercise of control by the directors from New Zealand does not make the company a tax resident in New Zealand.
- Fixed establishments: The double tax agreement between most countries and New Zealand states that a company with a permanent establishment in New Zealand will have income tax consequences here. A permanent establishment for a business is a fixed place where the business activity is wholly or partly carried on. A non-resident company will not become a New Zealand tax resident because of a fixed establishment only after a short period of time. The fixed place needs a degree of permanency, that is, the fixed place is not of a purely temporary nature. For a fixed establishment, the business must be carried out on a regular basis and it must be undertaken wholly or partly through the fixed place. Whether there is a fixed establishment is determined by having regard to the facts and circumstances of each case, which includes the COVID-19 emergency. A relevant consideration will be that the non-resident company did not have a fixed establishment in New Zealand prior to the present emergency and the presence of employees in New Zealand is short-term being related to current travel restrictions.
- Student loans: There is a 184-day test for student loan repayment obligations. At 184 days, the borrower becomes overseas-based instead of New Zealand-based. Interest is charged for all overseas-based borrowers. A borrower who has a student loan will not become overseas-based just because they are stranded outside New Zealand under the COVID-19 emergency conditions. The extra days when the borrower was unable to return home will be disregarded if the person returns to New Zealand within a reasonable time after they are no longer practically restricted in travelling.
- Performance of personal or professional services in New Zealand on a short-term visit: The 92-day test provides an exemption for certain non-resident income that a non-resident person derives from performing personal or professional services in New Zealand during a short-term visit. In ordinary circumstances, the income earned in New Zealand by a person providing these services is subject to tax in New Zealand and PAYE must be withheld by an employer after 92 days in relation to all income derived from the time of arrival. If the visit to New Zealand is less than 92 days, the income is exempt. This removes the requirement for employers to account for and withhold PAYE in relation to employees making short-term visits to New Zealand. The COVID-19 emergency could cause service providers to have to stay in New Zealand longer than 92 days despite their plans to leave. Any extra day when the person was unable to leave and that is in addition to the 92 days will be disregarded if the service provider leaves or returns to their country within a reasonable time after they are no longer restricted in travelling.
- Transitional residents: There is a 48-month test for transitional residents. If this time is exceeded, transitional residents become subject to New Zealand tax on their worldwide income. The period of transitional residence begins on the first day of residence in New Zealand. It ends when the person either stops being a New Zealand resident, or on the last day of the 48th month after the month in which the person first satisfied the residence tests (whichever is earlier). Transitional residents who may have planned to leave New Zealand before the 48-month transitional resident period ended are now unable to easily leave the country. A person should no longer be regarded as a transitional resident just because they are stranded in New Zealand due to the COVID-19 emergency conditions. The extra days when a person was unable to depart will be disregarded if the person leaves New Zealand within a reasonable time after they are no longer practically restricted in travelling.
Government Track and Trace Covid App -19– still two weeks away!
- This has been far to slow in coming, it shows a lack of innovation and drive in this space, Australia have already launched last week. Its small things like this that give the public confidence in a Govt’s ability to roll, they could have been building this type of App a week before lockdown, it was always going to be needed. The Australian Govt Covid-19 site for business is far superior, I’m not bashing the NZ Govt, but they can and need to lift their game and be faster better and more nimble, they need to roll out responsibly wider and get things done, there channel is to narrow. Better to take some action than no action, fix the mistakes on the fly.
- Per the herald article from Jason Walls:
The Government has promised that a Covid-19 contact-tracing app will be available in less than a fortnight. The announcement comes as the Australian Government launched its own voluntary app, designed to limit the spread of Covid-19 through an early notification system. New Zealand Prime Minister Jacinda Ardern has said in recent weeks that technology would be part of the answer to speeding up contact tracing.
- What Australia have done here!
Fair Commercial Leasing Lobbying (Finally some action here)
- Watch this space, we have clients on both sides of the fence here. It’s very disappoint this has dragged for so long for all parties concerned. There is now significant lobbying to the Government and to the Prime Minister to obtain tenant protection and implement a compulsory code of conduct for commercial leases, I note Australia have had this in place since 7 April 2020 (3 weeks). Various Industry Groups are driving this for their members, including the Auckland Chamber of Commerce, Franchise Association, Retail NZ, Hospitality NZ, Restaurant Association, Hart of the City, and Baking Industry Association.
- Yesterday on the 29th of April the Prime Minister finally promised action on commercial leases, probably after intense lobbying (hats off to the above groups) from industry groups representing business sectors to urgently resolve immediate and longer term commercial tenancy under the COVID-19 lockdown and wider economic recovery plan. Yesterday, the Prime Minister promised action and finally referenced the Code of Conduct that was introduced in Australia four weeks ago to address similar concerns over the Tasman. That it took so long for the government to get to this point is appalling. The government are basically saying they have done very little of anything hoping it would self-resolve. If the Government want the confidence of the wider business community they need to be further in front not following and not reacting, and its fundamentally annoying when Australia out performs us!
- Jacinda Ardern’s full statement was:
‘I want to talk about NZ’s small businesses, many of whom will now be back at work but some who will not. We have already put in place the wage subsidy scheme to help with what is usually a firm’s largest costs – wages ¬– and today I can share news of further work that we are doing to help with commercial rents.’
‘As many of you will know, we have already agreed to push out deadlines on lease terminations when someone moves into arrears, but it is clear that this alone would not be enough for many businesses so we need to provide more reassurance – as much as we are able to within the law.’
‘Although we cannot currently impose a commercial rent reduction, we have asked commercial tenants and landlords to work together to reach a fair agreement. However, some parties on both sides of the contract appear unwilling to renegotiate payment terms, with officials advising that some landlords are demanding full rent from tenants who have been unable to trade for several weeks and cannot afford it, while some well-resourced tenants have written to landlords declaring that they refuse to pay their rent for several months.’
‘Minister Little discussed options with other ministers at cabinet committee this morning. I can confirm that we are actively working on measures under which parties to a commercial lease would be expected to consider rent concessions in whole or in part for a period where the response to Covid 19 has had a material impact on business.’
‘We’ve heard the call from small business owners over and above that already provided by the wage subsidy and tax measures and we are working actively to resolve that. So in principle we have supported the work Minister Little is doing. We expect papers to come shortly and as soon as those final decisions and work has been completed by the Ministry of Justice has been completed we will be sharing it. ‘
‘I do want to acknowledge that something similar has been worked out in Australia. That Code of Conduct as I understand it hasn’t been legislated, that needs to happen at a State level, so we are working looking at some of the similarities of what they have done here and what will be workable under our Property Act in NZ.’
- Australia are here already: https://www.pm.gov.au/sites/default/files/files/national-cabinet-mandatory-code-ofconduct-sme-commercial-leasing-principles.pdf
RBNZ Proposes Removing LVR Restrictions announced 21 April 2020
- This might prop up the housing market though noise suggests there is an avalanche of expats with cash trying to get back home so there will be demand for property I think, Auckland especially.
- The Reserve Bank intends to remove the Loan to Value Ratio (LVR) restrictions for a period of one year, until 1 May 2021. We have not yet determined what, if any, LVR limits will be needed in the future. This will be further considered ahead of the end of the 12 months, and will be consulted on as necessary.
- A loan-to-value ratio (LVR) is a measure of how much a bank lends against a mortgaged property, compared to the value of that property. There are currently two macro-prudential LVR restrictions (“speed limits”) in place:
- Banks are permitted to make no more than 20 percent of their residential mortgage lending to high-LVR (less than 20 percent deposit) borrowers who are owner occupiers,
- and Banks are permitted to make no more than 5 percent of residential mortgage lending to high-LVR (less than 30 percent deposit) borrowers who are investors.
- The calculation of new lending under the LVR policy would capture only the new amount of lending associated with any mortgage deferral, arising from the capitalisation of principal and/or interest during the deferral.
Guides for Businesses in Distress and financial Trouble
If you are dealing with or have a business in distress, there are some notes attached from RITANZ, and their web link below with a host of other information on all sorts of areas, including the economy https://www.ritanz.org.nz/ RITANZ – Restructuring Insolvency & Turnaround Association of New Zealand.
A very cool take to navigating level 3 from The Spinoff here in 60 questions, covers everything you need to know!
Track and Trace apps for customers visiting sites or offices
- If you are operating in level 3 and need to track visitors to your premises here is a good app you can download.
- If you need something more specific for your business contact Jamie Shephard at www.CloudSquared.net
they have built some cool stuff for clients here is an example: https://fc.cs2.nz/
Jamie Shepheard | Consultant
Mobile: 021 750 572
Support: 0800 112844
Don’t forget Common Sense in Risk Management in your Business!
- A big thanks to John Scott at Summit Scaffolding the other day for pointing out, basic practical thinking around keeping real risks front of mind! He pointed out that he needed to explain to health and safety after dealing with 1 million forms and rules, not to forget the real risk! What’s that they asked? He said making sure they don’t fall off the Bloody Scaffold! That’s still his number one, and always number one risk to manage, falling off will kill you faster than Covid, he also pointed out that in theory, on site risk of Covid is now much lower than before lockdown with track and trace and knowing where the risks are. Summit take risk management really seriously and John was just pointing out that when you get obsessed with Covid, you can miss the other more present and immediate risks!
Company & Non Profit Meetings , and Advisory Boards on Line
- We found this kiwi owned and developed platform that will help you with the above, it’s not a client or related, have a look few good tools in there!
Annual Pricing starts from $1,200, so it’s not cheap, but if you are wanting to be organised and demonstrate good governance it’s a nice suite of tools.
How are the Drug and Weed Dealers doing (just out of interest and asking for a friend)?
- How this segment coped or was going to operate in lockdown fascinated me right from the get go! It’s a good read, remember these guys run businesses, we may not like them, but they have interesting features to observe! The estimate of tax in the shadow economy is in the order of 1 billion dollars, so that makes the size of it (not just drugs) in the order of 3-5 billion conservatively. That’s a lot of cash money to launder, bitcoin to move and all the shops are closed! Anyone wondered about the proliferation of Barber Shops and Laundry Mats in the last 36 months with the introduction of AML laws (the only reason why you still need a passport now 😊… not funny ok sorry)?
Mother’s Day! Sunday 10 May (Men you owe Us… because you know you will forget)
Hospo Businesses looking for options other than Uber Eats for simple local transactions
- We came across Aishley Khanijoe last week, who has been working 24/7 on his web page Ordrin, link and details below. He is a business analyst and designer focused on reducing costs and increasing traction for SMEs, using readily available online tools to re-engineer and automate business processes. He has developed Ordrin as a basic way to hooking up customers and businesses locally, but I think he has a lot of scope to build it out.
The sign up page is here, with pricing and platform details, it’s a no commission deal. http://get.ordrin.co.nz/#sign-up
- Ordrin’ Facebook page
https://www.ordrin.co.nz/ Website for customers
Find eateries that are near you.
We have added about 150 eateries to our map & will be adding a lot more during the week.
You can find eateries that offer click + call & collect and order directly from them using the offered method. 🍔😋
The other volumes/tools are at the Jacal website, so please save it to your favourites: https://www.jacal.co.nz/jacal-covid-19/ Email us if you want anything from vol 1-7.
The Covid Government Business NZ website also updated daily has great information: https://www.business.govt.nz/covid-19