It’s been a pretty hectic year, to say the least, and although everyone’s trying their best to roll with the punches, for a business owner the constant fluctuations of 2020 have been overwhelming, stressful, unyielding, or all of the above. Luckily Christmas and the New year are fast approaching- meaning we can kiss 2020 goodbye, and get cracking on smashing 2021.
Although the year has been pretty tumultuous, the government has provided some bang on support measures to help keep SMEs moving and thriving. We’ve jotted down a list of the current need to know’s regarding business recovery, tax, and anything else you may need to know as a business owner that’s been through the thick of it in 2020.
A lifesaver for some businesses – the Small Business Cash Flow Loan is still available for application until 31 December. To be eligible for the loan you must have 50 or fewer full-time employees and be viable on an ongoing basis (meaning your business is likely to be able to pay your debt in full and on time over the next 18 months.) Long story short, the maximum amount of the loan is $10,000, plus $1,800 per employee for a company. If you’re a Sole Trader, you can receive up to $11,800. The loan is interest-free if you repay it in full in the first year. Following this, the annual interest rate is 3%.
Temporary Tax Loss Carry-Back – Here’s a goody for lovers of the loss carried forward tax rules – the government announced earlier in the year a tax loss carry-back. Essentially, this means that businesses who made a loss in the 2020 year or are expected to make a loss in the 2021 year may be eligible for a tax refund, therefore carrying back the loss to the preceding income year that was profitable. You may have already noticed this in your 2020 annual’s in the form of a tax refund, however, you could also ask for a refund of provisional tax paid for 2020 if you’re wanting to carry back the estimated loss for 2021. Your business may be eligible if you’re expected to incur a loss in the 20/21 years and made a profit in the year before the loss. Get in touch with your Outside go-to for a rundown.
A lifesaver for many with the May and August provisional tax payments, The commissioner of IRD has the ability to write off any late penalties and interest for payments with a due date after 14 February. HOWEVER, you must be able to show that your business had been significantly negatively affected by COVID-19 – even then, there is no guarantee that you will be eligible by the commissioner’s standards. You would also need to have got in touch with IRD and arrange a payment arrangement (as well as be able to meet these payments). Although it buys time to make tax payments, it’s important to note that you must make payment as soon as practicable – It does not mean that tax is written-off.
If your business has a large number of fixed assets, your Outside go-to may have talked your ear off about this one. The threshold for low-value assets has increased from $500 to $5,000 for the 2021 financial year and permanently to $1,000 from 17 March 2021. This means that if you purchased an asset from 17 March 2020 and it’s below the $5,000 threshold, you can now expense the full cost of the asset in the year it’s incurred, rather than having to spread the cost of the asset, over its life. A solid tax win when you think of the cash now, or cash later idea.
We’ve only listed a few, however, there are many more support options still available for businesses; including R&D tax incentives, Business Finance Guarantee Scheme Loans, and certain flexible tax arrangements (consistent with your business situation). Find these here.
It’s easy to list the options and leave you to do your own research … but we don’t do easy! Get in touch with your Outside go-to, give us a call, or pop into the office to chat about your options and direction. If you’re feeling confused and overwhelmed about your business situation, we’re eager to know what’s happening and help by providing the resources, knowledge, and skills to get you moving.
Your Outside team, Ruby and Fizz
Mail: PO Box 24-457, Wellington 6142
Phone: 04 889 2975