Information and Resources for COVID-19
We are in a rapidly evolving legislative environment and we are doing our best to interpret
the information as it comes to hand and sharing as much information as possible.
I’ve heard that if I claim the wage subsidy after the 27th March, I have to keep all my employees on for the full 12 weeks?
Yes, if you claim the wage subsidy after the 27th March, you cannot make anyone redundant for the full 12 weeks.
Can I claim the wages subsidy for my au pair?
Unfortunately not, as this is a personal expense. However, the au pair themselves can theoretically claim as a contractor.
I’ve applied to the IRD and I haven’t heard anything yet. Should I make another application?
No, you shouldn’t make another application. It may take a few days or longer for your payment to come through due to high demand at this time.
What are the tax changes that might help me through this period?
The government has announced some tax relief measures. We’re sure there will be more to come, but at this stage, this is what has changed.
These tax changes are to support confidence and cash flow in the economy:
- Reinstatement of depreciation for commercial and industrial buildings of 2% from the 2021 tax year.
- Increase in the provisional tax threshold from $2,500 to $5,000.
- Write-off of low value assets – this starts now (17th March 2020) so there is an advantage to buying low value assets – under $5,000, which can be written off this year in full. This limit will apply from now until 16 March 2021 when it will drop down to $1,000. If you need a new computer to work from home, buy it now.
- The IRD can remit use of money interest
- Remove the hours requirement in the in work tax credit as part of the working for families tax credit.
How do I claim the wages subsidy?
Is there anything I can do to reduce my commercial lease payments during this time?
We have received some advice which indicates you might be able to hold a negotiation with your landlord on the following basis:
Disclaimer: This isn’t intended to be legal advice for your specific circumstances. Rather, it is intended to help and empower businesses with a general strategy of preserving cash flow in these difficult times. Each situation will turn upon its own unique facts. Please seek advice if necessary.
Some Auckland District Law Society (ADLS) leases include a right to abate rent payments during circumstances that can include NZ’s COVID-19 Alert level 3 or level 4. Abatement is a right to adjust the rent (and sometimes outgoings) according to the circumstances (discussed more below) for a period of time. Whether it applies in NZ’s COVID-19 Alert level 3 or level 4 is dependent on the contractual clauses in your lease agreement, and how NZ’s COVID-19 Alert level 3 or level 4 impacts your ability to access and use of the premises.
What lease forms?
A right to abate rent and outgoing payments may apply to you if:
- you are required cease conducting your business from your premises during NZ’s COVID-19 Alert level 3 or level 4; and
- you have:
- an ADLS “Deed of Lease”, sixth edition 2012 with a clause headed no access in emergency (likely to be clause 27.5).; or
- an ADLS “Agreement to Lease” entered into in any time from 2012 or later that states that the lease shall be documented on the current ADLS Deed of Lease form (clause 4 headed “Lease” for most Agreements to Lease), and
- the relevant clause hasn’t been excluded or amended in a way that it won’t apply (that’s a great double-negative, but hopefully you get the point!).
These forms of lease are common for commercial and office space. I suggest you check your lease to see if this applies to you.
If this applies to you, then you may be relieved of the obligation to pay the full amount of your rent and outgoings while we remain at COVID-19 Alert level 3 or level 4.
Some other forms of lease may also have a similar right (but not many in our experience). Again, we suggest you check the specifics of your lease.
Why we think it applies
Paraphrased the no access in emergency provision (clause 27.5) provides that a tenant is entitled to a fair abatement of rent and outgoings where:
- if there is an emergency (non-contentious);
- you are unable to gain access to the premises to fully conduct your business; and
- that access is restricted because of reasons of safety to the public or the need to prevent, reduce or overcome any hazard or harm.
Like everything in law, there are always contrary arguments. While we think it pretty clear, expect for landlords to argue:
What to do if you have rights of this nature?
Putting aside the legal side of the lease, there is a community aspect and landlords (and their staff, and families) are also affected by this too.
We don’t say this on the basis that you should forego your rights, and you need to look after your business, but be mindful of how you communicate with your landlord and on what arrangements you seek to obtain. Commercially while the immediate short-term economic pain of COVID-19 is felt, in the long-term we suggest not burning bridges with your landlord – landlords are long-term partners.
Within the above context, we suggest promptly notifying your landlord (or sub-landlord if you sub-lease), making them aware of the situation as it applies to your business, and noting your right to abate (perhaps amongst any other matters you wish to ask for/negotiate).
In relation to any right in a lease to abate, you’ll need to make a judgement on:
- duration: whether your inability to gain access to the premises to fully conduct business applies to your type of “non-essential business” during just Alert level 4, or both Alert level 3 and level 4; and
- fair portion: what a fair portion of rent and outgoings to abate should be.
For many tenants with a 100% restriction on operating their business from the premises, a fair portion to abate may well be 100% of your rent and outgoings – but this is not certain and will depend on your individual circumstances and may be argued to the contrary by landlord (see the table above). Ultimately this will be down to an objective test. If you have applied too high of a percentage – you will be liable for the shortfall, which could put you in breach of your lease. If in doubt, seek advice.
The draft landlord notification below assumes a 100% abatement of rent and outgoings for the duration of level 3 and level 4 – and doesn’t extend to any other matter or terms you might wish to negotiate. Note: while a 100% abatement of rent may be fair, a 100% abatement of outgoings may not be fair. This will depend on your own particular circumstances.
Instead of abatement now, you may want to try and open up a wider discussion to negotiate a better deal with your landlord. We’ve seen instances of different arrangements, e.g., longer rent holidays or reduced rent spread over a longer period of time. Government announcements about mortgage holidays and some moves in respect to bank business loan relief may help your landlord help you too. Be conscious it may take some time for your landlord to be able to respond – but hopefully many are in a position to respond.
Please adjust the notification for your situation, including the items in square brackets.
Suggested notification to landlord if you have a rent abatement right
Dear [insert valued landlord name/contact],
Subject: Covid-19 rent and outgoings abatement – [insert name of business, and premises address]
I hope this notice finds you and close ones safe in these difficult times.
As a result of the Government’s declaration that NZ moved to COVID-19 Emergency Alert [“level 3 on 23 March and] “level 4” on 25 March, our business cannot access the premises at [insert address] to fully conduct our business and clause [27.5] of the Deed of Lease (no access in emergency) applies.
This clause provides for a fair proportion of the rent and outgoings to be abated where there is an emergency. Emergency is defined in clause 45.1(d) of the Deed of Lease and includes an “epidemic”.
As you can appreciate, we are unable to gain access to the premises to fully conduct our business from the premises because of:
- reasons of safety of the public or property; and
- the need to prevent, reduce or overcome any hazard, harm or loss that may be associated with the emergency.
Given we have a 100% restriction from operating our business from the premises under COVID-19 Emergency Alert [level 3 from 23 March and] level 4 from 25 March, we consider an [100%] abatement of our rent and outgoing payments for the duration of time that the NZ has declared a COVID-19 Emergency Alert level 3 and level 4 as fair.
The Government expects this level of alert to last for at least 28 days at this point (i.e., until at least 19 April) but it may be longer. We will start to apply a 28 day abatement in our next rent payment.
We are mindful this may hurt your financial position, and we value our relationship with you. Our business is also hurting as a result of these Covid-19 restrictions. The impact on our business has been immediate and significant. Unfortunately, we need to exercise this lease right at this time to manage our controllable cost structure with the same immediacy and don’t do it lightly. We hope that the crisis will be abridged, and we can resume normal rent practices just as quickly.
Please acknowledge receipt of this notice.
Please don’t hesitate to contact [insert name and contact details] if you would like to discuss. We look forward to working together during this difficult time
FAQ: How do I deal with employees who are now on leave?
One of our clients, HR Toolkit, has been providing some great content and material on how to look after your people so here are some links courtesy of them (thanks HR Toolkit!):
Beany is not an expert in HR matters so we defer to the experts on this.
Query: How do I get an NZBN number for the wage subsidy application?
If you need to locate an NZBN number for your application or apply for a new one use this link.
Query: If I delay making my claim, does that mean I will get less than the full 12 weeks?
As far as we can tell, it doesn’t matter when you make your claim. You can claim now for the full 12 weeks or in the middle of April, you can still claim the 12 weeks. Just be aware that you cannot make two claims for the same business.
Query: Can I claim more than once, if I work in two businesses as a contractor?
This is not covered in the documentation so we are taking a common sense approach. You cannot make two full time claims, but you could potentially make two part time claims.
Query: Can I claim for a new staff member who hasn’t started yet?
Theoretically, you can include them in a claim if you are still going to start them and pay them 80% of the agreed wage. This is a grey area and we suggest that you don’t make your claim until they ‘start’.
Query: Is the government still going to increase minimum wages on April 1st?
This may be the subject of announcement coming soon, but at the moment, they are still going ahead with the increase.
FAQ: I can’t get through to the IRD. What do I do?
Don’t panic. No one can get through at the moment (including us). However, we can communicate through secure mail and we are doing that on your behalf. We are watching where you are at and making sure that you are as safe as possible from a tax perspective.
Client Query: Is Beany operating during the lockdowns?
Yes Beany is Open; The entire Beany team has been remote since the launch of our company. Our staff remain working as usual and more than happy to assist with any queries or services you might need.. firstname.lastname@example.org
Client Query: How do I treat the wage subsidy in my Xero (or other) file?
Set up a new “other income” code on Xero and name it Wage Subsidy – Non Taxable and ensure that its set to no GST. We can help you set up the code, or show you how. Replace this with:
If you are the employer, set up a new “current liability” code on Xero and name it Wage Subsidy. Click on this link https://central.xero.com/s/article/Add-or-edit-an-account-in-your-chart-of-accounts for instructions on how to do this or contact our Support Team and we can do it for you.
We are recommending that the subsidy is coded to a Balance sheet code so that when it is used to pay wages it is then transferred against the wages account in the P&L.
The employer will not be liable for income tax or GST on the subsidy received from MSD and will not be entitled to an income tax deduction for wages paid out of the wage subsidy.
If you are self employed or a contractor, set up a new “other income” code on Xero and name it Wage Subsidy, this is a taxable income. Click on this link https://central.xero.com/s/article/Add-or-edit-an-account-in-your-chart-of-accounts for instructions on how to do this or contact our Support Team and we can do it for you.
NB If you are in partnership: Each individual partner will need to apply for the sub as a self employed individual making the claim then the subsidy is taxable income to them. If you have employees under your partnership, claim as a ‘normal’ wage subsidy.
Please contact email@example.com with any questions.
How do I claim the wages subsidy?
The best resource for this question can be found at this link. Essentially all businesses including the self employed and contractors can claim the following wage subsidy if their actual, or projected revenue, falls by 30%.
- Working over 20 hours per week = $585.80
- Working under 20 hours per week = $350.00
You can claim yourself here and our clients are getting paid in approximately 24 hours.
The government has removed the $150,000 cap on the wages subsidy claim.
New businesses or high growth businesses can now compare their revenue to a previous month (as opposed to a previous year).
There is a requirement on employers to use your best endeavours to pay 80% of normal wages – or you must pass on the entire wage subsidy to the employee.
Charities and not for profit are now included.
You are now required to keep employees in employment for the period of the wage subsidy.
Nothing in the scheme changes the normal legal obligations to your employees.
Client Query: Invoicing per school term and showing business drop
“I invoice per school term. How can I show a drop in business month to month comparatively when this term has been paid for?”
If you don’t think you will get paid for the next term, then you are projecting a drop in revenue – you can claim for this.
Are the banks helping?
We still do not have detail on this but Grant Robertson announced that commercial bank loans up to $500,000 would be available to businesses that turn over between $250,000 and $80 million. If you are in that range and need money to get through Covid 19, the government will under-write the loan which will be repayable over 3 years on normal commercial terms.
Additionally, a mortgage holiday of up to six months may be available to individuals so they can have security around their home.
The mortgage deferral scheme is now open. If you wish to defer your mortgage, contact your bank now.
FAQ: How do I work from home?
We will be posting a blog shortly on a whole range of tips and tricks on this so will update shortly. But some general points:
- Work in the cloud – Google Drive means that all your communications, file storage, contacts and tasks can be saved on the cloud in one secure location.
- Keep a good routine going at home. Start and stop at set times and take breaks.
- Go for a walk in the garden, around the block, or hop on your bike for a quick daytime power exercise.
- Manage your children – take some time to explain how things are different and how you need to work from home – this is a great opportunity to show them good work habits and explain what you do and how it contributes to the family.
- Learn how to run virtual meetings and use video conferencing – business life will never be the same again so why not use this as an opportunity to learn some new skills.
- Stay connected – working from home does not mean social isolation – the Beany team work in a very connected collaborative way from our homes. Practice different ways of socializing from google hangouts to hanging over the fence talking to your neighbours (from a safe distance).
FAQ: Can I claim for Casual Employees?
If you intend to keep employing your casual employees then yes you can claim for them.
FAQ: Can I use the wage subsidy money for anything else?
No, the money you receive should be used for paying your people. However, we are hopeful that the government will be announcing more funding for other key expenses items, such as rent, shortly – we’ll keep you posted.
FAQ: I need to make a tax payment plan with the IRD. How do I do that?
We are encouraging all our clients to think about this ahead of time. You can organise your own payment plan in your My IR portal – but please feel free to contact firstname.lastname@example.org and we can help you.
FAQ: Some of my workers are contractors AND employees - do I apply for the subsidy or do they?
You apply for your employees and advise your contractors that they need to apply for themselves.
FAQ: Can I claim if I’m a shareholder/employee?
“I take drawings as a business owner and have employees – does the subsidy also cover me?”
Yes, is the quick answer.
Many of our clients work for their companies and get paid an annual shareholder salary (as opposed to being paid via PAYE income). We have consulted with tax experts and there is no definitive answer yet – but we are advising a common sense approach. If you work in your business for more than 20 hours a week and get paid as a shareholder/employee, it seems likely you will be eligible for the subsidy of $585.80 per week.