COVID-19 wage subsidy and leave payment

The NZ government has announced a comprehensive package to assist businesses and individuals. If you are affected, either as an employer or employee, you may be entitled to some relief, either through financial or tax relief. To apply for the wage subsidy, either as an employer or a self employed person, click on the link here. If you are eligible I’d suggest applying for this as soon as possible.

Talk to your bank manager

There may be some immediate financial support available to assist with your cash flow and working capital. Your bank may be able to help via increasing temporary overdraft facilities, extending trade credit, deferment of repayments, interest only periods, extension of term lending periods and short term / hardship loans. I would recommend making these inquiries soon.

Talk to your insurance broker

It may be that you have business interruption or income protection insurance. Discuss the specific wording of your policies with your broker and if you can make a claim surrounding your current situation.

Review your staffing requirements

This may be one of the most challenging items to review, even though reviewing business operations and resourcing is one of the most important for business continuity. Re-forecast your sales pipeline for the next 12 months based on the current climate, then re-forecast the appropriate staff levels required to complete this work. If you need to review the next steps for staffing, ensure you have the right support around you, including HR and legal.

Speak to your landlord

Rent is generally a significant cost for a small business. I would front foot a conversation with your landlord as it could be worth discussing the potential for reduced rental payments in the interim. Full rental payments could then be deferred and paid later when your business is back and running at full capacity. After the government’s announcement yesterday, Commercial rental property landlords are now able to claim 2% depreciation deductions on buildings (from April 2020). This will reduce landlord’s income tax payments, so may mean that they’re open to different payment terms in the short term.

Prepare a cost out on other costs

This is, driving profitability through cost savings. I would start by running your business Profit and loss and identify any costs that aren’t required. These should be classified as temporary or permanent. Do some analysis and act quickly. You will end up with a lean business, in a better position to counter the unknown.

Delay payments for provisional tax (due 7 May 2020)

Unless you have excess cash flow and want to pay this on time, I’d recommend delaying these payments to the IRD. This will result in more retained cash in the business. When things improve, you can pay this tax to the IRD. If you do take this option, I’d suggest calling the IRD to let them know, to mitigate your risk against penalties. Another option is when normal business resumes, you pay your tax to a tax intermediary, and buy the income tax required at an interest rate less than the IRD (dependent on how liberal the IRD around interest charges for the COVID-19 period)

Delay payments for GST

If cash is significantly tight for your business, I’d also suggest delaying these payments to the IRD. GST returns will have to be filed on time with the IRD though. Again, if you do take this option, I’d suggest calling the IRD to let them know, to mitigate your risk against penalties.

Pay payroll taxes on time

It is highly important this is adhered to as normal. The IRD can take legal action against those who don’t comply with payroll taxes, including non payment. This is a serious offence and can result in prosecution. An employer can be fined up to $50K and / or be sent to prison for up to five years. This tax has to be paid on time.

Chase outstanding monies owed to you

I’d get in quick with your customers, so you’re in the front of the queue. For some basic tips on chasing debtors click on this link.

Tax Pooling payments can be refunded

To my clients that pay their company or personal tax into the Tax Pooling Solutions tax pool, these funds can be refunded to taxpayers if required. This is one of the significant advantages of paying income tax to a tax intermediary. If you want to know how to get these funds out, let me know.

Keep adding value to customers

This is a very basic tip and self-explanatory, but the more value you add to your customers, the more likely they are of continuing with your service and paying you on time.