The Government has been monitoring the impact of the COVID Protection Framework on businesses and the economy.
With the settings of the framework, most businesses can open and operate relatively normally, even at red. We can see that the majority of the economy is operating close to normal, but in some sectors, like hospitality and events, there has been a significant drop-off in business. There are a range of reasons for this, but it is clear that the impact is putting a number of viable businesses at risk of not being able to operate.
Each COVID Support Payment will be $4000 per business plus $400 per full-time employee, capped at 50 FTEs or $24,000. This is the same rate as the most recent Transition Payment.
Applications for the first payment open on February 28, with payments starting from March 1.
It will be available on a fortnightly basis for 6 weeks, with 3 payments in total. This reflects the international experience that the peak of the Omicron outbreak should pass after about 6 weeks. We will continue to closely monitor the situation and have the option to extend the payment if this if necessary.
We have set a higher threshold in terms of revenue loss than previous support in order to target those most affected. Firms must show a 40 percent drop in 7 consecutive days within the 6 weeks prior to the shift to Phase 2 of the Omicron response on February 15, compared to 7 days after that date.
We looked closely at whether we could offer sector-specific packages, but the definition of who is in what sector, and the need for cashflow to be provided quickly meant that was not a feasible option to reach the most affected.
Changes are also being made to the Small Business Cashflow Loans Scheme to increase the amount of funding available to eligible businesses through the introduction of a ‘top up’ loan.
The top up loan will allow those firms that have already accessed a loan to draw down an additional $10,000 with a new repayment period of 5 years and the first 2 years being interest free.
Cabinet has also agreed to remove the first 2 years of accrued base interest from all borrowers who have, or will, take out a loan under the scheme. This change will mean interest will only start accruing at the beginning of year 3.
We are also extending the Commissioner of Inland Revenue’s ability to apply flexibility for tax payment dates and terms to assist firms with cashflow pressures.
Any businesses struggling to pay tax because of the impacts of COVID should log on to myIR to see if they can delay starting payments to a later date, or if any part of the tax could be written off. IR can help with both GST and provisional tax due.