25th March, 2020

What support is available for freelancers and sole traders during COVID-19?

With the announcement of wage subsidies and other support for businesses impacted by COVID-19, we asked local expert Lynley Averis, owner of AccountAgility NZ, how sole traders and freelancers can apply to receive assistance.

UPDATE (6/4/20): We have since compiled an updated list of all New Zealand stimulus measures so far.

Last week, Finance Minister Grant Robertson announced that small and medium businesses that can demonstrate a loss of 30 percent of their usual revenue are eligible for $585.80 a week per full time employee for 12 weeks.

Many sole traders, freelancers and businesses with no employees (there are currently 385,000 New Zealanders who work for themselves) were left wondering whether this package applied to them, and how they can receive support.

The good news is you don’t have to be a business with employees to apply for the Government’s wage subsidy and leave payment scheme. We asked local payroll expert Lynley Averis, of AccountAgility NZ, to help us break down what does and doesn’t apply to sole traders, in easy-to-understand terms.

Available stimulus in summary:

  • If you’re a sole trader or self-employed worker based in NZ and have had a 30% decline or more in predicted revenue and taken active steps to mitigate the impact of Covid-19 on your business, you’re likely eligible for the wage subsidy of 12 weeks at $585.80
  • If you cannot work because you have been diagnosed with Covid-19 or because you are caring for dependents with the virus or you need to self-isolate (in line with MOH Guidelines) you are likely eligible for the leave payment scheme. This offers sole traders a bulk payment $585.80 for a period of 8 weeks. If you are in the Level 4 lockdown then that does not qualify you for the leave payment
  • The Key Business Tax Changes Apply to sole traders as well as all businesses
  • For sole traders who also have a part-time job, your employer can apply for the part-time subsidy and you can also make a self-employed application

NB: This information may well change as the situation develops. We recommend checking back regularly for updates.

As a sole trader, are you eligible for the COVID-19 wage subsidy?

Yes. If you’re a sole trader working in New Zealand or you’re registered and working as a business in New Zealand with a business IRD number, you may qualify for the Government’s 17 March financial rescue package ($585.80 per week), if:

  • You’ve had a 30% decline or more in actual or predicted revenue, related to Covid-19, over one month when compared with the same month last year. If you haven’t been operating for a year, Averis suggests to check your sales figures (from your invoice book, accounting system or bank statement) for the past month/s. “You can compare to the current month which has the Covid-19 influence. It can be an actual or projected figure,” said Averis.
  • You’ve taken active steps to mitigate the impact of Covid-19 on your business. “Active steps means talking with your accountant or business adviser. They should be able to help pull together your sales figures too.”

Does the COVID-19 Leave Payment Scheme apply to sole traders too?

Yes. ‘Freelancers and the self-employed can apply for the leave payment scheme if they cannot work from home as they have been exposed to the virus or are caring for someone with the virus or they need to self-isolate according to Ministry of Health guidelines,’ explained Averis.

The Leave Payment Scheme offers sole traders weekly payments of up to $585.80 for a period of up to 8 weeks. It comes as a lump sum, is exempt from GST and is not included as taxable income. Averis recommends: “It’s best to track this payment separately in your accounts, due to the GST and tax exemptions”.

Complete the form here to apply for the COVID-19 Leave Payment Scheme.

Do the Key Business Tax Changes apply to sole traders?

Yes. ‘These key business tax changes apply to all businesses, which include sole traders,’ confirmed Averis. The changes include:

Giving a time-limited discretion to Inland Revenue to remit use of money interest (the interest on tax debt) if a taxpayer is unable to pay on time due to the impacts of COVID-19.

The reinstatement of depreciation deductions for commercial and industrial buildings at a 2% diminishing value applying from the 2020-21 tax year.

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Increasing the threshold for provisional tax from $2,500 to $5,000 applying from the 2020-21 tax year.

Is there any Additional Assistance for sole traders?

Yes there is. For sole traders who also have a part-time job, your employer can apply for the part-time wage subsidy and you can also make a self-employed application. So long as the criteria is met.

The Government has also introduced additional measures to support NZ’s most vulnerable people, including:

  • Removing the hours test from the In-Work Tax Credit to assist those who may face variable hours
  • A $25 across the board permanent increase to main benefits, from 1 April 2020
  • A doubling of the amount paid in 2020 through the Winter Energy Payment

When it comes to definitive financial advice, now’s your opportunity to talk to an accredited business advisor to ask them to assist with reviewing actual or forecast decline in revenue, to be eligible for the wage subsidy and other packages.

MYOB has provided this guidance with the assistance of payroll expert and owner of AccountAgility NZ, Lynley Averis. It does not constitute financial advice, and we encourage anyone who believes their business is impacted by COVID-19 to get in touch with an accredited advisor to discuss their options.