Calculating a drop in revenue

Revenue refers to income generating activity by a business or organisation.

For a cashflow business, such as a restaurant, this is likely to be the daily takings. For a business that invoices clients, this will be the activities the business carries out and then bills clients for.

Income that is received passively - such as interest and dividends, and all forms of residential and commercial rent - is excluded as revenue.

Calculating affected revenue due to a COVID-19 circumstance

Businesses and organisations needed to measure their revenue over a continuous 7-day period (7 days in a row) in the affected revenue period where the business or organisation had a drop in revenue due to 1 or more COVID-19 circumstances.

The affected revenue periods were:

First CSP – 16 February 2022 to 4 April 2022.
Second CSP – 7 March 2022 to 4 April 2022.
Third CSP – 21 March 2022 to 4 April 2022.

After working out the revenue for the continuous 7-day period in an affected revenue period, it was compared against a typical 7-day revenue period in the 6 weeks between 5 January 2022 and 15 February 2022. Alternatively, a typical 7-day comparison period between 5 January 2021 and 15 February 2021 could have been used.

The affected revenue period and the comparison period must be calculated based on what has happened, not a forecast of what might happen.

If the revenue drop calculated was 40% or more, a business may have been eligible for CSP. Standard accounting principles for income recognition applied.

A record of your calculations must be kept so you can give it to us if we ask to see it. Records include:

dates of the affected revenue period and comparison period
amount of revenue earned in each period
how the drop in revenue has been calculated
how the COVID-19 circumstances affected the revenue.

What is typical revenue

This is revenue that a business has earned during a continuous 7-day period that is considered to be normal or representative of the businesses' revenue. GST registered businesses used GST exclusive figures in their calculations.

If revenue is earned unevenly, then taking an average of the revenue in the comparison period and then selecting the 7-day period that is closest to the average was acceptable.

Some businesses may have been closed during the 2022 comparator period and also not operating at the time of the 2021 comparator period. These businesses were not eligible for the CSP, unless they were businesses or organisations with highly seasonal revenue (see below).

Seasonal businesses and organisations

Businesses or organisations with highly seasonal revenue must have met the drop in revenue test set out above. However, they may select a 7-day comparison period which is before 5 January 2022 and which may be from a past year, which reflects their typical revenue.

Businesses acquired after 15 February and before 17 January 2022

If a business was acquired after 15 February 2021 but before 17 January 2022 the applicant could use the revenue that the business earned during a typical 7-day period in the alternative comparison period between 5 January 2021 and 15 February 2021 as long as the same sort of business was being run by the previous owner. The revenue earned by the business for the alternative comparator period could be the previous or new owners - depending on when the new owner started running the business.

Recently acquired businesses

Sparkle Electrical issued no invoices during the Red setting of the COVID-19 Protection Framework as they chose not to trade. Most of their clients are not affected by the Red setting, and over this period, their billable hours are 90% of the typical week’s revenue from the 6 weeks before New Zealand moved to Phase 2 of the Omicron response on 15 February 2022. Sparkle Electrical is not eligible for the CSP as it has not experienced a 40% reduction in its income generating activity due to one or more COVID-19 circumstances.

NZ Food Limited operates a restaurant in Auckland CBD that can host up to 200 people at any given time. Due to NZ being in the Red setting of the COVID-19 Protection Framework (traffic light system), the restaurant has had to limit the number of customers it can host to 100 people (including children). Additionally, due to the increase in COVID-19 cases within the NZ community, customers are choosing to stay home and order take-out instead. NZ Food Limited has made several attempts to minimise its drop in revenue by offering various discounts for dining in, juggled staff rosters to deal with quiet periods, offering takeaway options. Notwithstanding the steps taken to minimise the revenue drop, the restaurant has suffered a drop in revenue of 50% compared to the week before NZ entered into Phase 2 of the Omicron response being 15 February 2022 (being a typical week). NZ Food Limited may be eligible for the CSP as their drop in revenue is more than 40% and is a result of 1 or more of the COVID-19 circumstances.

The Scrumptious Cooking School runs 3 12-week cooking classes per year. These start in February, May, and October. Fees are paid before each class starts. Even though there was a change in settings from Orange to Red in the COVID Protection Framework in January, the classes were able to run by using COVID-19 Vaccine Certificates, no fees were refunded and there were no economic impacts due to Omicron experienced by the school. The income for the class starting in February is spread across February, March and April. This means there is no reduction in revenue in February, March or April, and they are not eligible for the CSP.