Happy New Year!

2020 was surely an unforgettable year for most of us. It left behind many questions without answers and losses without recovery. However, it doesn’t mean we as businesses will surrender. Black Arrow Business Studio and our clients have survived one of the most historically severe recessions in history and we are here to stay and grow stronger, and we will! Happy New Year!

Small Business Cashflow (Loan) Scheme changes

The Government has announced some changes to the eligibility criteria for the Small Business Cashflow (Loan) Scheme. These changes align the eligibility criteria with the Government’s recent decision to extend the application period for the scheme until the end of 2023.

These changes will take effect from early February 2021. In the meantime, the current eligibility criteria remain in effect and businesses can continue to apply for the loan using the existing criteria.

To view the current eligibility criteria, along with more information on the Small Business Cashflow (Loan) Scheme visit: www.ird.govt.nz/covid-19/business-and-organisations/small-business-cash-flow-loan

To view the Ministers’ announcement visit: Small business support expanded | Beehive.govt.nz

The changes

Changes have been announced in four areas:

1. When the business was established
2. The decline in revenue test
3. Employee number test
4. Re-borrowing

When the business was established

• From early February 2021, businesses that were established after 1 April 2020 will be able to apply for the Small Business Cashflow (Loan) Scheme. They will need to have been in business for at least 6 months prior to applying and meet the other eligibility criteria. Currently, to be eligible, they must have been in business before 1 April 2020.

​The decline in revenue test

• From early February 2021, the criteria relating to the decline in revenue will change. To be eligible a business must show:
  • at least a 30% actual drop in revenue;
  • measured over any 14-day period in the previous six months, and compared with the same 14-day period of a year ago, or
    • if the revenue from the same period of a year ago was affected by COVID, compared with the same 14-day period two years ago, or
    • if the applicant was not in business a year ago, compared with the same or similar period in the previous month; and
  • the revenue drop arose from the continuing impact of COVID-19.
• Currently, applicants must have experienced a decline in actual or predicted revenue of at least 30% in any 30-day period between January and June 2020, compared with the same period in the previous year.

Employee number test

• From early February 2021, businesses applying for the Small Business Cashflow (Loan) Scheme will be measured on the number of employees they have at the point they apply. The limit to the number of employees hasn’t changed, only the date at which they are calculated. Currently, employee numbers are measured at the point the business received the wage subsidy or 9 June 2020.

Re-borrowing

• From early February 2021, businesses that have fully repaid their loan before the end of 2023, can re-borrow one further time. This is provided they meet the other eligibility criteria at the time they apply to re-borrow. Note that if a business has defaulted on a previous Small Business Cashflow loan, they will not be eligible to re-borrow. Currently, a firm cannot re-borrow.

Small Business Cashflow (Loan) Scheme – Amended Terms and Conditions

On 9 November 2020 the Government announced changes to the Small Business Cashflow (Loan) Scheme.

The changes included:

• No interest will be charged if the loan is repaid within two years. Under the original Terms and Conditions of the Small Business Cashflow Loan Scheme Contract no interest is charged if the loan is repaid within one year.
• From 9 November 2020 the restrictions on what the loan can be spent on have eased so that the loan can be spent on investments to help businesses adapt to the impact of COVID-19.

In addition, applications for the loan can now be made until 31 December 2023, an extension of three years.

Inland Revenue is working on making these changes for all borrowers.

Existing borrowers started receiving their updated Terms and Conditions from Thursday 17 December, accompanied by a letter outlining the changes.

The majority of customers will receive their letter via myIR and the letter will be sent to the customer’s linked tax agent if the agent has set up a mail redirection.

For new borrowers the changes will apply automatically once the online system is updated in December.

All other aspects of the loan scheme remain unchanged at this stage.

Borrowers are able to check their loan balance at any time in myIR.

For more information visit: www.ird.govt.nz/updates/news-folder/covid-19-small-business-cashflow-loan-changes

Taxation Bill changes

On 3 December the Government passed the Taxation (Income Tax Rate and Other Amendments) Bill.

It contains four main measures:

• introducing a new top personal income tax rate of 39%
• introducing increased disclosure requirements for trusts
• increasing the Minimum Family Tax Credit threshold for the 2020-21 tax year
• clarifying the ability for Inland Revenue to require information for the purposes of providing quality policy advice.

We’ll be sending more information in the new year. For now, please visit Inland Revenue’s tax policy website: www.taxpolicy.ird.govt.nz if you want more information.

If you have any questions please feel free to contact us!