Today Government announced finance packages to help mortgage holders and SME's
- The package will include a six month principal and interest payment holiday for mortgage holders and SME customers who's income has been affected by the economic disruption of COVID-19.
- A six-month mortgage holiday for people whose incomes have been affected by COVID-19 will mean people won’t lose their homes as a result of the economic disruption caused by this virus.
- The Government and the banks will implement a $6.25 billion Business Finance Guarantee Scheme for small and medium-sized businesses, to protect jobs and support the economy.
- The Business Finance Guarantee Scheme will provide short-term credit to cushion the financial distress on solvent small and medium-sized firms affected by the COVID-19 crisis
- The scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum. The loans will be for a maximum of three years and expected to be provided by the banks at competitive, transparent rates.
- The specific details of this initiative are being finalised and agreed urgently and banks will make these public in the coming days.
- The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.
- In addition the Reserve Bank has agreed to relax the core funding ratio for banks from 75% to 50%, so assisting banks to make more credit available.
They also clarified the tax treatment of wage and leave subsidies:
- They are not subject to GST. An order in Council is currently being drafted to treat it as exempt (Section 5(6E)(B) (iii GST Act)
- The wage subsidy and leave subsidy paid to the employer is not taxable. It is excluded income under Section CX 47 Income Tax Act
- It is not deductible when paid by the employer as part of wages to employees.
- It is taxable for the employee. It is included as part of their normal wages and subject to PAYE, Student Loan, Kiwisaver deductions etc