8 July 2020
The Government has announced several changes to the tax law and various forms of assistance, which can help agribusinesses affected by COVID-19 to mitigate the impacts they are experiencing.
Additionally, the Ministry for Primary Industries (MPI) have launched a fund, similar to the fund that was launched to eradicate Mycoplasma bovis, to help farmers get professional advice in relation to the current drought.
A wage subsidy of $585 a week per full-time employee and $350 a week per part-time employee for up to 12 weeks may be available for businesses in the agricultural sector that employ people.
To be eligible, your business must:
- Have suffered or be able to project it will suffer a 30 percent decline in revenue compared to last year for any month between January 2020 and June 2020 (when the subsidy ends).
- Declare it has made best endeavours to continue to employ affected employees at a minimum of 80 percent of their normal income for the duration of the subsidy.
- Take active steps to mitigate the impact of COVID-19 on your business (e.g. engaged with your bank and financial adviser).
- Sign a declaration form.
If you are considering applying for a wage subsidy for your employees, please discuss this with your adviser.
Government guaranteed business loans
The Government has introduced a loan scheme for businesses with a turnover from $250,000 to $80 million. Eligible businesses can apply for loans of up to $500,000 for three year with the Government providing a guarantee for 80 percent of the loan amount.
Agricultural businesses are excluded from the loan scheme, however, businesses in horticulture, viticulture, aquaculture, and agricultural contractors are eligible. The loan scheme is managed by the banks and applications are made by engaging with your usual banker.
Small business cashflow scheme
Available to businesses with less than 50 full time equivalent employees, the small business cashflow scheme enables eligible businesses to apply for a loan of $10,000 plus $1,800 per full time equivalent employee.
The loan is interest free if repaid within a year and, after this, interest applies at three percent. The loans are for a five-year term, but there is no requirement to make repayments for the first two years.
Income equalisation assistance for the primary sector
For farmers, fishers and growers, whose current or future income will be significantly affected by the impacts of COVID-19, Inland Revenue (IRD) will allow a class of late deposit cases for the 2019 tax year up to 30 June 2020, regardless of when the 2019 return is filed or what the due date is for filing the return.
The quantum of the deposit is limited to the net income from agricultural activities for the 2018/19 income tax year.
Additionally, farmers, fishers or growers materially affected by COVID-19 will be permitted to make early refunds. Generally, the refund will be income in the year the application is made, however, there is an exception where the application for refund is made in either the specific period or, in the instance of a class of cases, a longer period is allowed by the Commissioner. You can choose the refund to be income in the income tax year that the specified period of the longer period relates to.
Changes to the loss continuity rules
The Government is proposing the introduction of a “same or similar” business test to supplement the shareholder continuity rules for carrying forward tax losses. If implemented the changes would apply from the 2020-21 year.
Under the “same or similar” test, a company would be able to carry forward losses despite ownership changes, provided the company carries on the same or similar kind of business that it carried on when the losses were generated.
This would allow companies to raise capital without the concern their losses would be forfeited by a breach in shareholding continuity.
Tax loss carry-back scheme
A temporary tax loss carry-back mechanism will be introduced to allow taxpayers to offset a current year tax loss against a prior year profit and receive a refund of the tax paid in that previous year.
This will apply to tax losses incurred in the 2019-20- or 2020-21-income years. Taxpayers incurring a loss or forecasting a loss in either of these years, will be able to carry the loss back to an earlier income year.
Drought recovery advice fund
The fund launched by MPI to help farmers get professional advice in relation to the current drought, will provide up to $5,000 (excluding GST) per farmer. The fund is capped at $500,000 (excluding GST).
To be eligible, your farming business:
- Must be in a 2020 drought-affected region or district.
- Must have been negatively affected by the 2020 drought.
- Must contribute at least 50 percent of your income earnings in a normal year.
If you would like more information on accessing the COVID-19 subsidies or drought recovery advice fund, please contact one of the team at Findex.
Findex NZ Limited, trading as Findex
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