2020 “Rebuilding Together” Budget
Alliott NZ Summary
As expected, the 2020 Budget has been a high spending one with a deficit forecasted to be $29.6 billion in 2021.
Unemployment is projected to increase significantly, peaking at 9.8 per cent in the September 2020 quarter before recovering thereafter.
New Zealand’s real GDP growth rate is projected to decline from 2.8 per cent in the year ending June 2019 to -4.6 per cent in the year ending June 2020. Annual real GDP growth is not forecast to become positive until the year ending June 2022.
The Government’s net core debt is predicted to be 30.2 per cent of GDP in 2019/20, 49.8 per cent of GDP in 2021/22 and 53.6 per cent of GDP in 2023/24.
The key areas of expenditure in the 2020 Budget are:
- $5 billion to construct 800 houses for Kainga Ora
- $3.9 billion for the District Health Board
- $3.2 billion to extend the wages subsidy to September 2020
- $3 billion to fund infrastructure and create jobs
- $1.6 billion for the trades to fund training, workforce and development
- $1.1 billion to create 11,000 environmental jobs
- $1.1 billion to improvement in transport
- $900 million to support COVID-19 recovery for Maori
- $833 million for access to disability services
- $400m targets tourism recovery fund for domestic tourism
- $202 million for family and sexual violence service providers
- $195 million Pasifika recovery package
- S160m for Pharmac Funding for vaccines and medication
- $150m loan funds for R&D intensive businesses
- $32 million to support Exporters
- $11.4 million for Agritech
- $2.3 million for advisory services to 600,000 SMEs
Wage Subsidy Extension $3.2 billion
The current Wage Subsidy Scheme finishes on 9 June 2020. From 10 June, a more targeted scheme will take its place. Businesses will need to have suffered a 50% reduction in revenue for the 30-day period up to the application date as compared to the nearest comparable period in 2019 in order to be eligible.
Other eligibility criteria are expected to stay largely the same with high growth businesses and new firms to continue to calculate their eligibility as per the existing scheme. A new initiative is to allow pre-revenue R&D start-up firms recognised by Callaghan Innovation to also be eligible.
Eligible businesses will receive a further 8 weeks of Wage Subsidy funding at the current rates. There will be a 12-week period where applications will be open (10 June to 2 September 2020).
Trades Training and Workforce Development $1.6 billion
Funding of $1.6 billion has been allocated to trades for tertiary education enrolments, support for employers to retain and keep training apprentices and targeted investment support for free trade training in critical industries. Certain targeted vocational training courses will also be free for all ages.
Domestic Tourism $400 million
This $400 million package consists of a Tourism Transitions Programme designed to deliver advice and support for businesses that need to move their focus towards the domestic and Australian market. There will also be a Strategic Tourism Assets Protection Programme where some of our key tourism assets, attractions and amenities – which play a vital part in our domestic tourism industry fund – will be identified and funded.
Research and Development $150 million
The Government has put aside $150 million for a fund to provide loans to R&D-intensive businesses, to complement the existing R&D Tax Incentive. Loans will be offered on favourable terms with the proviso that the money is used to conduct R&D of up to $100,000. The scheme will be up and running by early June.
Budget 2020 also sets aside $80 million to encourage entrepreneurs and businesses to develop new products by enabling them to claim tax deductions for unsuccessful or abandoned assets.
Advisory Services for Small and Medium Enterprises (SMEs) $2.3 million
This will enable business.govt.nz to work with 200 partners to deliver tailored recovery guidance and advice to 600,000 small businesses. Resources will focus on how to forecast and manage cash flow and adapt their businesses, obtain finance to meet needs now and for future growth, market their businesses here (especially tourism) and globally, adopt new digital technology, including e-commerce and productivity-enhancing tools, and deal with isolation and mental health issues.
There were no significant tax changes announced in the Budget. Most were pre-released and centred around COVID-19 relief. A summary of these are as follows:
17 March announcements
- Reinstatement of depreciation on non-residential buildings
- Increase in the low-value asset write-off from $500 to $5,000 for one year, then a reduction to $1,000
- The ability to remit use-of-money interest when taxes are unpaid due to COVID-19
- An increase in the provisional tax threshold from $2,500 to $5,000
15 April announcements
- The introduction of a temporary loss carry-back rule for two years, and replacement with a permanent measure in the second half of 2020
- The introduction of a same or similar business test for carrying forward tax losses in the second half of 2020
- The introduction of Commissioner discretion to help taxpayers meet tax obligations
1 May announcements
- Inland Revenue to administer the Small Business Cashflow (Loan) Scheme