7 Apr 2020

Covid-19: More business questions answered

6:46 pm on 7 April 2020

As Covid-19 spreads around the world, it can be daunting keeping up with the information. For RNZ, our responsibility is to give you verified, up to the minute, trustworthy information to help you make decisions about your lives and your health. We'll also be asking questions of officials and decision makers about how they're responding to the virus. Our aim is to keep you informed.

The RNZ business team have been finding answers to the Covid-related questions you've been sending us. Here's a run down of the latest.

Week one's questions and answers.

Credit cards for payment.

Photo: 123RF

Can we expect a cut on credit card rates?

Answer: On 1 April 1 ANZ dropped its Low Rate Visa and Visa Business purchase and cash advance rates to 9.95 percent per annum (pa), until 30 June 2020.

All other cards have dropped to 19.95 percent pa. Kiwibank's Low Rate card is already less than 10 percent.

The other banks have indicated they are keeping an eye on things and may move in the future.

See all RNZ coverage of Covid-19

How are countries able to borrow billions of dollars to help their countries survive Covid-29?

If all countries in the world are affected, I don't understand which countries have money to lend to others? Where is the money coming from?

Answer: Between now and June, the New Zealand government needs to raise an extra $25 billion.

It will do this by issuing government bonds, so investment funds, banks, big brokers, and in some circumstances the general public buy those bonds, which will mature on a set date and pay a set interest rate.

On maturity the government redeems the bonds by paying back the loan.

Bonds are sought-after as safe, rock solid investments, but they are tradeable on a secondary market where their prices rise and fall depending how nervous and volatile financial markets are.

Governments don't need physical assets to back the bonds they issue so as long as investors have faith they will get repaid - which is where a good credit rating matters - then investors will keep coming.

The Reserve Bank is in the secondary market buying bonds off banks and others to make sure money is getting into the economy and interest rates are under control.

But it's signalled that if things get tough it will buy the bonds directly off the government.

You can get more information and details about the borrowing programme from the Debt Management Office's website.

Finance Minister Grant Robertson

Finance minister Grant Robertson has announced a number of packages for businesses during the Covid-19 pandemic and subsequent lockdown. Photo: Pool / NZME

Can landlords who don't have current tenants apply for financial assistance?

We are landlords of a residential property. Our tenant's notice was up on Tuesday 24 March, and they vacated. We have been unable to get a new tenant. Can we apply to work and income for financial assistance? This residential property has been a consistent mid to long term rental over years.

Answer: The following two examples hopefully clarify when a landlord may be eligible to apply for financial assistance via the wage subsidy.

A landlord who owns several properties, regularly works on those properties for over 20 hours per week and draws a regular income for that work (not just receiving rent to pay the mortgages) is regarded as being self-employed.

A landlord in this situation can apply for the wage subsidy at the full-time rate, assuming they meet the other eligibility criteria including a 30 percent reduction in revenue and are proactively engaging with their bank.

If their tenants are continuing to pay rent as normal, a landlord is unlikely to experience a 30 percent drop in revenue due to Covid-19.

A landlord who owns a couple of investment properties but simply receives the rental income into their account without doing any active work is not drawing an income for that work and cannot apply for the subsidy in respect of any loss in rental income.

They may be able to access other relief in relation to their mortgage and should speak to their bank.

Some landlords have insurance from rental losses, you could also talk to your bank and consider applying for a six-month home loan deferral.

Read more about the Covid-19 coronavirus:

Does income tax and/or GST have to be paid on the wage subsidy?

Is there a difference between employers and sole traders?

Answer: Employers do not pay tax or GST on the wage subsidy amount.

Their employees, when they are paid, are taxed with the usual deductions (Kiwisaver etc).

Sole traders are required to account for income tax on the wage subsidy received i.e. include it in their individual tax return - IR3.

How will the current economic condition affect consumer debt?

I don't have a business or a mortgage but what I am concerned about is how this current business climate will affect consumer debt and what this means for me. Will my bank now decline my application for a debt consolidation loan due to the current economic crisis? What can I expect re interest rates or expectations of the bank on me because of this climate?

Answer provided by the editor of the Sorted website, Tom Hartmann:

The best way to approach this is to talk to your lender first.

These days they are dealing with a range of customers who need to make new arrangements for their loans because their income has been interrupted by Covid-19.

Since your income is still consistent, your lender will be able to gauge what you can sustain and make the call on whether it's possible to consolidate your loans.

You might be surprised how they're willing to make things work with you.

After all, they deal with this sort of thing all the time, have certainly not ceased lending altogether, and everyone these days is having to be flexible.

Borrowers have a few options these days that will be helpful: repayment holidays, interest-only repayments, and consolidation to name a few.

But it is only in talking to your lender directly that you can understand what's available.

It doesn't hurt to ask, and your good credit history should put you in good stead.

If you need someone in your corner as you work with the banks, try the team at MoneyTalks, even anonymously, who can give you more personalised advice.

They're government-funded, and are independent and impartial.

They're available via phone on 0800 345 123, live chat at moneytalks.co.nz, by text at 4029 or email: help@moneytalks.co.nz.

Can employers apply for the wage subsidy for specific departments?

I am a casual for a large recruitment company with different divisions. The division I work in has been shut down but some of the other divisions remain operational. Overall the company has not lost more than 30 percent revenue, but my division has lost 100 percent of its revenue. Can my employer apply for the wage subsidy?

Answer from Chapman Tripp Partner Marie Wisker:

My understanding is that it's being looked at, at a tax group basis.

If you take the example of one company with a number of different groups within it then it's going to have one number from a tax perspective and it will be that, that MSD looks at for the 30 percent drop in revenue.

Exhausted tired businessman working on laptop at office, massaging temporal area, holding glasses, feeling fatigue discomfort, eye strain after long wearing spectacles, eyesight problem,

Photo: 123rf

My employer won't apply for the wage subsidy for their casual employees, only permanent, is this fair?

Answer from Chapman Tripp Partner Marie Wisker:

Firstly, there's no obligation on any business, even one that's performing poorly, to apply for the wage subsidy.

Secondly, with relation to casuals the ability to apply there is very much dependent on whether that casual would have been expected to work over this next period.

When we went into level four lockdown many businesses had already taken steps and a common step to take was to prioritise the permanent staff rather than the casual.

So many casuals, arguably, can't be claimed for because they wouldn't be expected to work over this next period.

I was made redundant in the lead up to the lockdown, what assistance can I get?

Answer from Chapman Tripp Partner Marie Wisker:

An employer can re-employ their staff and apply for the wage subsidy for them.

However, they needed to have been employed as at 17 March and they needed to have been let go because of Covid-19 and not for other reasons.

If you have business, finance or economic questions to do with the impacts of Covid-19 email us at business@rnz.co.nz and we'll try to clear things up.

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