COVID-19: Help available to NZ businesses
A summary of the various financial and non-financial assistance available is detailed below along with the steps you need to follow to apply. The scene is evolving quickly so please also read the updates.
**update 28/03/2020 >> the changes are summarised below in this article. Further advice here.
**update 02/04/2020 >> for further updates and tips when applying for bank loans read here.
** Government updates >> Read the WINZ website for the most recent news and developments
Leave Payment
From 3pm on 27 March 2020, the COVID-19 Leave Payment is no longer available for employers. Applications already submitted will continue to be processed and paid.
Wage Subsidy - paying your staff
If you are receiving the COVID-19 Wage Subsidy, you must try your hardest to pay the employee named in your application, at least 80% of their usual wages. If that isn’t possible, you need to pay at least the subsidy rate (ie, full-time or part-time).
If your employee's usual wages are less than the subsidy, you must pay them their usual wages. Any difference should be used for the wages of other affected staff - the wage subsidy is designed to keep your employees connected to you
GST and Tax
You don’t have to pay GST or tax on the wage subsidy. It is exempt from GST, and classified as "excluded income" for tax purposes.
Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it's subject to the usual deductions, eg, PAYE, Student Loan, KiwiSaver, ACC.
Get in contact with us if you need help with the coding in Xero.
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Original Post and how to apply
In response to COVID-19 the Government is acting to support the economy, with a particular focus on small businesses, supporting employees, and taxes. The package includes:
- a wage subsidy scheme
- leave and self-isolation support
- business cash flow and tax measures.
A summary of each of these, along with instructions and links to assist with applications is detailed below. We’ve also outlined some of the
other help available to businesses.
Wage Subsidy
A further update to the wage subsidy scheme was announced on 23 March 2020. The subsidy now applies to all New Zealand employers, contractors, sole traders, self-employed people, registered charities and incorporated societies. The announcement also clarified that the subsidy applies to new businesses and to high growth businesses.
The subsidy is available if you can prove that COVID-19 has caused a 30% reduction in revenue. This can be on actual figure or projected revenue figure (for example, the effect on your revenue pipeline for Apr – May – June).
The amounts available are:
- $585.80 for people working 20 hours or more per week
- $350.00 for people working less than 20 hours per week.
The subsidy is paid as a lump sum and covers 12 weeks per employee. This subsidy is for wages only and should be put through your normal payroll procedures or systems**. It is available to help you keep your staff employed while you consider the changes required for the sustainability and future of the business.
**edit 24/03 : "It is our interpretation that, although the wages subsidy is for wages only, it is not necessary for it to be shown in the pay. The employer gives a commitment to paying a minimum of 80% of normal wages or salary when applying for the payment. Although the commitment is given it is not required for the subsidy to be shown on payslips." This from Rob Owen - Founder of payroll software PayHero. Cheers Rob we owe you a beer for that one.
To be eligible you have to:
- Show a 30% decrease in revenue when compared to the same month last year. The decrease must be related to COVID-19.
- Similarly, you could be forecasting a 30% reduction due to the effect of COVID-19. If you are forecasting, then we recommend you keep a record of the assumptions and calculation of your forecast.
- New businesses (less than a year old) and high growth firms (firms that have had significant increase in revenue) are also eligible. They need to demonstrate the revenue loss assessment against a similar time period. As an example a 30% loss of income, attributable to COVID-19, in March 2020 compared to January 2020.
- You must have talked to your bank to attempt to secure funding to help mitigate the impact of COVID-19. The idea here is that you have sought other options, rather than only relying on the subsidy.
- You must make best efforts to retain employees and pay them a minimum of 80% of their normal income for the 12 weeks. If that is not possible, for example where the business has had to close, then you must pass on the whole value of the wage subsidy to each affected worker.
- Businesses can only receive this subsidy once and must undertake to keep employees in employment for the period of the subsidy.
- If you're an owner and working in the business you are also eligible for the subsidy.
This application form is if you are applying for employees -
To apply, you need to complete the application form here. You will need:
- Your IRD number
- Your business name (your name if you are a contractor or self-employed)
- Your business address
- You New Zealand Business Number (NZBN)
- The names of your employees
- Your employee IRD numbers
- Contact details for your business and your employees
This application form is if you are applying for just yourself (sole trader) -
To apply, you need to complete the application form here. You will need:
- Business IRD number (this is your personal IRD number)
- Employment type (whether you're working less than 20 hours, or 20 hours or more)
- IRD customer name (this is your name, not your trade name)
- Business address
- Contact name, email address and mobile number
- Bank account number.
The wage subsidy and leave payment should be treated as non-taxable income and non-deductible expenditure to the employer and also exempt from GST. Payments to employees as a result of the subsidies should be treated as normal salary and wages in the hands of the employees for tax purposes.
Leave Payment
Payments for leave will be available if employees have to self-isolate for 14 days or longer and cannot work from home. The leave payment covers full-time, part-time and casual employees.
The amounts available are:
- $585.80 for people working 20 hours or more per week
- $350.00 for people working less than 20 hours per week.
Employers receiving the payment for employees who are required to self-isolate can receive it for 14 days. As people may be required to self-isolate more than once, employers will be able to apply for this on an ‘as needed’ basis. It can be paid for the entire period an employee is sick (or looking after a dependent person who is sick) with COVID-19 but the employer must apply every 14 days.
Key parameters of the scheme are:
- Eligibility is open to all employees legally working in New Zealand (through their employers), the self-employed, and contractors.
- Eligibility will only be for workers who are not able to work from home.
- The entitlement is for those who self-isolate in accordance with public health guidance and who register with Heathline, those who are ill with COVID-19, and those who cannot work because they are caring for a dependent in either of these circumstances.
- Those who leave New Zealand to travel overseas from 16th of March 2020 will not be eligible for this payment for self-isolation on their return.
You fill out the application form here. You will need:
- Your IRD number
- Your business name
- Your business address
- You New Zealand Business Number (NZBN)
- The names of your employees
- Your employee IRD numbers
- Contact details for your business and your employees
Business cash flow and tax measures
Whilst these are helpful, they are unlikely to have much of an impact on your cash flow. The Business cash flow and tax measures announced by the Government include:
- Increasing the provisional tax threshold from $2,500 to $5,000 from 2020/2021.
- Increasing the small asset depreciation threshold from $500 to $1,000 — and to $5,000 for the 2020/21 tax year.
- Allowing depreciation on commercial and industrial buildings from 2020/2021.
- Removing the hours test from the In-Work Tax Credit (IWTC) from 1 July 2020.
Inland Revenue are also offering help and relief around tax payments, use of money interest and penalties. A summary can be found here or by calling us to talk through your tax position.
Other assistance
We at Connected Accountants are here to help, whatever support is available to your business. Remember to think positively and proactively about the challenges ahead of you. Communicating with those in your network will help to build a stronger community, and as always we are here to talk.
Xero have been offering a Xero Assistance Programme to all starter, standard and premium subscribers. This service provides free and confidential wellbeing support to approximately 850,000 New Zealand small business owners, their employees and families.
The Restaurant Association has increased support for members who are struggling and has a 24/7 Helpline (0800 737 827). Emergency memberships are available and membership services include legal support, human resources, payroll, business mentoring and marketing advice.
The Government, Reserve Bank and retail banks have agreed in principle to significant temporary support for mortgage holders and a business finance guarantee scheme for those impacted by COVID-19 as the country moves towards Alert Level 4. The details of this will be announced in the next few days.
In the meantime, we recommend that you get in touch with your bank to talk through what changes can be made to your bank finance to allow better cash flow over the next few months.
Future developments
We are hopeful that the Government will have more to add to their assistance package as we move towards alert level 4. Among those are:
- The Government is expediting urgent work on new income support measures for all workers above and beyond the wage subsidy scheme, to be appropriate for how the economy will operate under level 4.
- Cabinet has agreed to freeze all rent increases and to look to extend no-cause terminations to protect people during this difficult time.
We will keep you posted on developments as the news is released. Until then, stay healthy and stay in touch.
Leave a Comment
You don’t have to pay GST or tax on the wage subsidy. It is exempt from GST, and classified as "excluded income" for tax purposes - DOES IT MEAN IT IS NOT CONSIDERED AS REVENUE INCOME AND WE DON'T PAY INCOME TAX ?
1. The wage subsidy is exempt from GST so you do not have to pay GST on it.
2. For companies who receive the subsidy it is classified as 'excluded income' for tax purposes but any wages paid out using the subsidy are not deductible - talk to your accountant about the treatment of the subsidy.
3. The wage subsidy IS TAXABLE in the hands of the final recipient. So employees will have PAYE tax deducted off it and the self employed will have to pay income tax on it - again talk to your accountant about the treatment of the subsidy.
You can find further information on the IRD website [https://www.ird.govt.nz/covid-19/business-and-organisations/employing-staff/wage-subsidies]
" Self Employed Application" contractors etc
Maybe you should show the link.
You are right. There is an application form for those that are self employed (don't have people working for them).
We'll update the blog with the relevant link but the following info will be required for the application:
1. business IRD number (this is your personal IRD number)
2. employment type (whether you're working less than 20 hours, or 20 hours or more)
3. IR customer name (this is your name, not your trade name)
4. business address
5. contact name, email address and mobile number
6. bank account number.