$12.1 billion support for New Zealanders and business
The Government has outlined a $12.1 billion package to support New Zealand in response to the global impact of COVID-19.
There are a number of initiatives that could go a long way to supporting the building and construction sector, which are outlined below. The Accord Steering Group will work through the details of this package and identify how the sector can take full advantage of these measures. We will continue to keep you updated as this progresses.
Reinstatement of depreciation deductions for commercial and industrial buildings
For the building and construction sector, the support package includes a reinstatement of depreciation deductions for commercial and industrial buildings, which will encourage business investment in the recovery phase of COVID-19 and support productivity.
This means a building owner will now be able to claim a depreciation deduction at the rate of 2 per cent per annum. The building owner will be able to use that reduced tax liability to invest back into the building or other activities – including new construction activity. The Government is encouraging building owners to use the reduction in the tax they will need to pay to reinvest in the building and construction sector through new activity. This move will allow around $2.1 billion, that would otherwise have been collected in tax, to remain with building owners and encourage investment.
Building owners have been asking for depreciation expense to be reinstated to support them to upgrade their building especially in relation to the requirements in relation to earthquake strengthening. This packages supports these requests.
The wage subsidies will be available for businesses in all sectors and all regions that can show a 30 per cent decline in revenue for any month between January and June 2020 compared to the year before (including projected revenue). If eligible, employers would be paid $585.80 per week for full time staff, and $350 for part time. Payments are capped at $150,000 per business. They will be paid in a lump sum. The support will be available for twelve weeks with applications open today. Businesses must have taken active steps to mitigate the impact of COVID-19 (eg. engaged with their bank) and signed a declaration form to that effect. Estimated total cost: $5.1 billion.
COVID-19 leave and self-isolation support
The COVID-19 leave payment scheme will provide support (through employers/to sole traders and the self employed) for those people unable to work because they are in self-isolation, are sick with COVID-19 or caring for dependents who are in either of these situations. The payments will be equal to the rate of the wage subsidy scheme but available for a maximum of eight weeks. Employers will be expected to meet all of their sick leave and other employment expectations. Estimated total cost: $126 million.
$100 million has been allocated to support worker redeployment. The Tairāwhiti region will be the first to receive assistance, with the package to be agreed by COVID-19 Cabinet Committee on Wednesday.
Fewer small businesses having to pay provisional tax
From April 1 2020 the threshold for provisional tax will lift from $2,500 to $5,000. This measure will reduce cashflow pressure and compliance costs for small taxpayers by allowing roughly 95,000 businesses to defer their tax payments. Estimated total cost: $4 million.
Immediate deductions for low value assets
Immediate expensing allows businesses to fully deduct the cost of low-cost assets when they are purchased, with the threshold for the write-off currently at $500. We are putting in place a temporary increase in the threshold to $5,000 for one year, reverting to $1,000 in the longer term (still higher than the current $500 threshold), which will reduce compliance costs for businesses. It will also have the side-benefit of stimulating business purchases. Estimated total cost: $667 million.