So the budget has been released. If there is one thing that can be said for it, there is a lot of money about to be released into the economy.  And while there is some direct support for business, there is also a lot of indirect support through services that the government will seek to acquire from the private sector, or the expansion of the public sector.  This money will flow through the economy, providing further support for business.

We summarise the key aspects that will affect many businesses.

  • The wage subsidy will be expanded for a further 8 weeks. This can be applied for once the existing wage subsidy has finished, which is 12 weeks from this was applied for. Revenue needs to be down 50 percent.
  • Trades will be supported through the construction of more houses and apprenticeship programmes.
  • New investment in infrastructure.
  • Research and development loan scheme .
  • Support in expanding into overseas markets through New Zealand Trade & Enterprise.

It is all well and good to have a budget. The proof will be in the delivery. Housing is an area that has challenged multiple governments, and with this sector currently operating at capacity, the best that I can foresee is that houses will continue to be constructed at the current rate, keeping the trades ticking along. A decline in property prices probably wouldn’t help the sector. I note that other areas the government has had difficulty delivering on have been quietly held back. Good bye light rail, we may see you in a decade.

As a keen tramper, I (Bill) support the further investment in the DOC estate, particularly with the upgrading of tracks and huts. I just hope they are not built to city slicker standard!

Small Business Cashflow Scheme loans from IRD

While we know that taxpayers often see the IRD as a short-term provider of finance, albeit with significant penalties and interest, we haven’t seen a situation previously where the IRD is the provider of loans.  Technically it isn’t, as the loan that a small business can take out is between the business and the crown, and does not fall into the tax camp. As such, tax agents, including Rise, cannot act on your behalf to secure a loan.  We can only represent you for tax. But there is nothing stopping us from providing advice.

To be eligible for the loan, a number of criteria need to be met. These include being eligible for the wage subsidy (even if you didn’t apply for it), that the loan will be used for business expenses, and that the business is viable.

The amount that is available is $10,000, plus $1,800 for each full-time  equivalent employee, to a maximum of $100,000.

The loan is interest free if repaid in the first year, otherwise it attracts an interest rate of 3 percent. No repayments are required for the first two years. Any balance remaining at the end of year 2 will result in a repayment schedule being created for the remaining 3 years, and this repayment schedule needs to be kept to, or further penalty interest will apply (currently 7%).  That could take total loan interest cost to 10 percent.

Applications close 10 June.

Wage Subsidy Expansion

As announced in the budget, there is an expansion to the wage subsidy. To qualify, you need to have experienced a 50 percent decline in revenue compared to the “closest” period last year. The application cannot be made until the first 12 week wage subsidy has completed. The payment covers 8 weeks per employee from the date the application is submitted. Applications open June 10, and close 1 September.