COVID-19:

Self-Employed Guide

The Covid-19 outbreak has brought about unprecedented social and economic disruption for New Zealanders. You may be facing reduced or lost income during this time and need to adapt to your new circumstances, even if they are only temporary.

We have put together some resources and information below that you may find helpful.

If you have multiple creditors, are lost and unable to see the wood for the trees, then seek advice - call us on 0800 DEBT 1010, email us helpline@debtfix.co.nz, or start our assessment process by following this link.

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Wage Subsidy Scheme

The purpose of the Government’s Wage Subsidy scheme is to ensure that people continue to receive some kind of income even if they are unable to work due to the COVID-19 outbreak.

Self-employed people are eligible for the Government’s wage subsidy scheme, but they must be able to demonstrate a drop in revenue compared to the same time period last year i.e. March 2019 versus March 2020, or a comparable period for businesses that have only been operating for less than one year.

Criteria to be eligible for wage subsidy:

  • New Zealand-registered business operating here

  • You are legally working in New Zealand

  • Your business has experienced a 30% loss in actual or expected revenue due to COVID-19 over the period of a month, compared to the same month last year

  • You have taken active steps to reduce the impact of COVID-19 on your business

  • Active steps include things like talking to your bank, drawing on cash reserves, or making an insurance claim for loss of earnings (where possible), however it is likely that for self-employed the commitments here are likely to be less stringent than on employers.

The wage subsidy amounts are as follows:

  • If your regular working hours (pre-COVID-19) were 20 hours per week or more, you are eligible for a subsidy of $585.80 per week for 12 weeks

    • $7,029.60 total payment per full-time worker

  • If your regular working hours (pre-COVID-19) were less than 20 hours per week, you are eligible for a subsidy of $350 per week for 12 weeks

    • $4,200.00 total payment per part-time worker

  • You will still be responsible for accounting for any payment received as taxable income, and hence should be included within your tax return at the year end, although depending on when you receive that payment will depend on what income tax year you will need to declare it as income. For those people that received the payment in advance prior to 31 March 2020, some of the income pay not be taxable until the following income tax year, as it is an advance on earnings, however that is currently unclear, so best to take advice before submitting your 2020 tax return.

 
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Debt Management

Lenders and Creditors

If you are worried you cannot make a repayment, be sure to talk to your lender or creditor beforehand. You may be able to agree on a new payment plan that takes into account your current financial situation. Reprioritise your spending. This may involve cutting back on unnecessary expenses for the short term and focusing on the basics. Temporarily suspend loan repayments or switch to interest-only payments for the short term to potentially ease some of your financial burden. Consolidate loans to make repayments more manageable to ease some stress, but remember that deferral does not mean forgiveness - you are still liable to pay those debts at a later date.

Inland Revenue

The Inland Revenue have introduced some relief for taxpayers but there is an obligation on the taxpayer to contact the Inland Revenue, via MyIR or by telephone - MyIR is probably the most effective way of doing so, as the call volumes for the Inland Revenue are significant at this time. There is no dedicated section on the IRD website for updates, however here is the latest available for businesses. Some key comments made by the Inland Revenue are as follows:

  • Payment Options - As we’ve already said, if a business is unable to pay its taxes on time due to the impact of Covid-19, we will understand. Get in touch with us when you can and we’ll write-off any penalties and interest.Mortgage Payment Holiday

  • Instalment Arrangements - We’re enabling more flexibility and lowering the threshold for instalment arrangements set up in myIR. The new minimum repayment rates are: - Weekly $20 (previously $50). - Fortnightly $40 (previously $100) - Monthly $80 (previously $200).

  • Compliance Activity - At Inland Revenue, we recognise this is a concerning time for tax agents and customers and we want to support you wherever we can through any current audits or disputes. We know you’re under a lot of pressure and uncertainty currently, and we want to work with you on a case by case basis. This may be by delaying the progress of an audit or dispute for a period.

Business Support Package and Mortgage Payment Holiday

The Government, in conjunction with retail banks and the Reserve Bank, announced a six-month principal and interest mortgage payment holiday on 24 March 2020 for people whose incomes have been affected by the Covid-19 outbreak. A few important things to note about this: Interest will still accrue on your loan during the repayment holiday and the deferred interest will be added to the principal amount of your loan Your bank will assess your suitability of each customer requesting a deferral You will need to contact your bank directly if this is something you are interested in Need some advice on managing your debt? Contact us on 0800 DEBT 101

In addition, the business Support Package includes the introduction of a Business Finance Guarantee Scheme, which is summarised here. Check with your existing bank as to whether you are eligible, and if so, on what terms. Each bank has its own credit criteria that they will be working towards, which may also include an assessment of any security available. You are likely to need a minimum of three monthly cashflow forecasts prepared, so contact your existing business adviser for assistance, or apply online for support through the Regional Business Partners Network, from whom a grant of $2,000 is available during this crisis.

Budgeting Tool

Now is a good time to take a look at your income and plan accordingly to ensure you have a clear idea of incomings and outgoings. Sorted has a handy budgeting tool that you can use as a starting point for your financial planning or start our personalised assessment process by following this link.

 
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Assistance and Personal Protection

The Government has introduced a number of new initiatives as well as amendments to existing schemes in order to assist New Zealanders during the COVID-19 outbreak.

Protection for tenants 

A freeze on rent increases came into effect on 26 March 2020 and will be in effect for at least six months, though the Government may choose to extend this. Ban on evictions or terminations of tenancies unless there are exceptional circumstances or both parties agree for the duration of the lock-down period. Tenants can still terminate their tenancies as normal. If a tenant had given notice prior, they can rescind this and remain at the property during the lock-down period if need be. Tenants are still liable for rent payments, paying for property damage etc during this time as usual. The restrictions around tenancy terminations came into effect 26 March 2020 and will apply for at least three months, though the Government may choose to extend this. The priority at this time is to keep people within their homes where they can effectively self-isolate and prevent the further spread of Covid-19. If you need information on emergency housing, please see the Work and Income website.

Winter Energy Payment and change to Benefits package

The Government has agreed to double the amount paid through the Winter Energy Payment for this year (1 May – 1 October 2020). Single people with no dependent children will receive $40.91 a week.Couples and people with dependent children will receive $63.64 a week.You can find out more about the Winter Energy Payment and your eligibility on the Work and Income website. If you need help with urgent costs like power, gas, water or heating, you may be eligible for assistance from Work and Income. From 1 April 2020, a $25 per week increase will apply to all main benefits. This change is permanent. Work and Income are also removing the hours test from the In Work Tax Credit to assist those who may face variable hours.

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Take care of your mental health

Call or text 1737 any time, 24 hours a day if you want to speak with a trained counsellor. These are trying times for all of us, it’s okay to ask for help.

 

DISCLAIMER

This is a guide only, prepared from information publicly available, however that information published by government and other parties is forever changing, and it may be that the information contained herein is inaccurate or incomplete at the time that you visit our website. It is an interpretation only and does not constitute legal advice.  Each businesses’ or person’s situation will be different and their rights, obligations and entitlements will need to be reviewed on that basis.  Specific legal advice may be required dependent on the nature of the circumstances applicable to them individually.