The Government has introduced the Small Business Cash Flow (Loan) Scheme (SBCS) to support businesses struggling because of the loss of revenue as a result of the COVID-19.
To be eligible for the SCBS loan, a business must have 50 or fewer full-time-equivalent employees. The loan has a five year term and must be repaid by 31 July 2025. The annual interest rate will be 3% beginning from the date of the loan provided. The loan is only interest free if paid back within a year. Repayments are not compulsory within the first 24 months.
Businesses will be entitled to a loan amount of $10,000 plus $1800 per FTE employee to a maximum of $100,000.
This scheme is designed to give small businesses access to cash flow to meet their fixed and operating costs such as rent, insurance, utilities, supplier payments and rates. The loan cannot be passed through shareholders or owners of the businesses through dividends.
The loan application is available at IRD website and is open up until 12 June 2020.
Wage Subsidy extended
Last week’s budget announced an extension to the existing wage subsidy scheme. A Wage Subsidy Extension payment will be available to support employers, including sole traders, who are still significantly impacted by COVID-19 after the Wage Subsidy ends. It covers the period of eight weeks from 10 June 2020 until 1 September 2020. Applications for subsidy cannot be made until 10 June.
The conditions that have to be met in order to apply for wage subsidy extensions is as follows:
1. The applicant must have had or must expect to have a revenue loss of at least 50% for the 30 days before the application
is made,
2. It will cover eight weeks per employee from the date the application is submitted, and is in respect of the employees listed in that application,
3. The subsidy gets paid as a lump sum at the same weekly rate as the Wage Subsidy,
4. The applicant has to undertake to perform certain obligations including the following:
• pass the subsidy on to your employees
• retain your employees for the duration of the subsidy
• do your best to pay your employees at least 80% of their normal pay
• Take active steps to mitigate the impact of COVID-19 on your business.
A temporary loss carry-back scheme has been introduced to support taxpayers in the current uncertain economic environment Generally, businesses use previous year’s losses to reduce their taxable income in future. However, due to the economic impacts of COVID-19, it is more likely many taxpayers will incur loss in the 2020 or 2021 income years.
Carrying a loss forward postpones the benefit of being able to claim losses and means that a taxpayer would still incur a tax liability for previous profitable years. The Loss Carry-Back Scheme will provide fast cash flow relief for businesses in loss during the period affected by COVID-19 and therefore clients with losses in 2020 or who have actual or expected losses in 2021 will be able to carry those losses backwards to the prior year and use against profits in that prior year and generate tax refunds as a result.
Almost all types of taxpayers – companies, trusts and individuals are eligible to carry back losses.
However, the majority of individuals with only PAYE income will automatically be excluded as they can’t have a loss to carry back.
We are more than happy to assist you – please contact us if you have any questions regarding the small business cash flow loan, wages subsidy extension or the loss carry back.
The team at Johnston Associates wish the Ponsonby News readers all the very best in these hard times, and we are here if you need us!
(Logan Granger)
Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.
JOHNSTON ASSOCIATES, 202 Ponsonby Road, T: 09 361 6701, www.jacal.co.nz