Hi there accounting fans!
Since Auckland went into a shortened lockdown due to the recent community cases, the government has stepped in to provide a bit of extra funding to businesses who have been adversely affected by the lockdown. Please note that the information contained in this article is relevant to businesses based in NZ. More specifically, it only applies to businesses who have been directly affected by the Auckland lockdown. This means that if you are an online based business with clients all over the country, you might not be able to apply for this payment support (which means that I can’t get it for my business!).
I decided to write this article since there seems to be a lot of questions around how to apply for it. So let’s get straight into it!
STEP 1
Head over to www.ird.govt.nz, login with your IRD login and click on the ‘Resurgence Support Payment’ link in the ‘I want to…’ window which is in the top right hand corner of your home page.
STEP 2
Once you click next, you will be taken to a page that pre-fills your NZBN (if you have one). The first box asks you if you have the authority to make the application. Leave this as “YES” – unless you actually don’t have the authority, in which case, WHAT ARE YOU DOING HERE??
The drop down menu allows you to select the Alert Level Raised period. Right now there is only one period (15 Feb 2021 to 22 Feb 2021). Additional dates may be added in here in the future as we experience more lock downs.
Are you apply on behalf of a group of businesses? Generally, leave this box as “NO”. You only check “yes” if you are applying for multiple entities that you own or have a share in. If you chose “yes” the next page will ask you to fill in all the entities you are applying for.
Is the applicant a “pre-revenue firm”. In most cases – you would leave this a “NO”. This only applies to firms that have just started (say 4 to 5 months) and have spent most of their funds getting the foundations in place (set up costs, advertising, research, purchasing assets, etc.) and have not made any sales.
Once done, click next:
STEP 3
The next page will contain a series of declarations which you should answer “YES” to all if you are eligible for them. If you answer “NO” to any of them, you may not be eligible.
These declarations are similar to the ones made when applying for the Small Business Cash Flow loan. The main things you want to be aware of is that:
- The decline is at least 30% during the alert level period as compared to any 7-day period prior.
- The decline is attributable to the movement in alert levels.
Click next when done.
STEP 4
Ok, here’s the tricky bit: Determining how much your revenue went down by.
So, first you want to select the 7 day period after the alert level increase (we will go with 15 Feb 2021 to 21 Feb 20210 in this example – feel free to use any other 7 day period after this date if that suits you better). Put in the amount of sales made for that particular week. If you made no sales at all, click “NO” in the selection box given instead of putting ‘0.00’ in the revenue box.
Next, you need to select the 7 day period before the alert level increase that you want to compare against. In this example, we will use 25 January 2021 to 31 Jan 2021. Put in the amount of Sales for that particular week. The ‘Decline Percentage’ box at the bottom will tell you how much % your sales went down by. This should be more than 30%.
The best way to determine the sales drop is by checking the Profit and Loss report on your accounting software and keying in the dates we just used above (or other suitable dates for you). My advice would be to use dates which allow you to fall within the 30% drop. So if, for example, using the sales figure from 25 Jan to 31 Jan does not give you a 30% drop compared to 15 Feb to 21 Feb, then try a different 7 day period (say 1 Feb to 7 Feb). Ensure that this period is within the 6-weeks period prior to the alert level being raised.
VERY IMPORTANT – Now, sales is not based on cash received (profit is not cash remember!) – sales is based on the amounts you invoice or bill your clients. If you work in retail, then you would be doing cash sales. If you do sales on credit, you would be issuing invoices. Check the date of your invoices issued – you should be taking into account these figures as your sales figures for the periods you are comparing. Are you using accounting software? Check that you are showing sales on an accrual basis and not a cash basis. If you need help with working this out, talk to an accountant.
If you are a ‘pre-revenue’ firm, you will be asked to input ‘capital raised’ instead of revenue made. Capital raised means the amount of funding you manage to raise for your business. This means any money received from grants, loans, personal savings etc. paid into the business for the purposes of starting the business up. If you need any help with working this out, you should really talk to an accountant.
Click next when done
STEP 5
The next page will ask you to put in the names and IRD number of your full-time/part-time employees that work for your business. Remember that as the owner/operator of your business, you should put in your name as well as a full-time employee of the business. Click next once you have put in the name of each employee (including yourself).
STEP 6
After clicking next, depending on the amount of revenue drop from Step 4 – you will get either one of the payment detail pages.
Exhibit 1 shows you the base amount ($1,500) plus another $400 for each FTE employee (the system takes part-timers as FTEs as well – that’s just how it is). So if you are a solo owner/operator – you can get a maximum of $1,900.
Note that if the revenue decline is LESS than the base plus FTE amount, you will only get that amount times four.
Exhibit 2 shows that revenue only declined by $400. For example, you made $1,000 sales before the alert level raised and $600 after the alert level raised. In this case, yes the decline is still more than 30%, but since the amount of decline times four is less than the base amount plus the amount paid for each FTE, you only get the decline amount times four. In this case, you receive $400 (the decline amount) times four = $1,600.
Click next when you are done
STEP 7
Alright, you’re pretty much done now! Just fill in your bank details and hit next. The next page will give you the full run down of the terms and conditions of the resurgence payment. Be sure to read through the terms and conditions before checking the ‘I Agree’ box. You will usually receive the payment within the next 10 days or so. If you have concerns about the payment, feel free to give IRD a call for more information!
Stay positive NZ!
Kia Kaha!