What is the Wage Subsidy Scheme?

Last week, finance minister Grant Robertson announced a wage subsidy scheme which will be available for all employers that have been significantly impacted by COVID-19.

A few updates have been made to the scheme since it was announced last week which have been listed below.

The scheme intends to:

  • support employers adversely affected by COVID-19, so that they can continue to pay their employees
  • supports workers to ensure they continue to receive income, even if they are unable to work

The modified wage subsidy scheme is available to all businesses affected by COVID-19 which includes the following:

  • self-employed
  • contractors
  • sole traders
  • registered charities
  • incorporated societies
  • post-settlement governance entities

The subsidy scheme was modified as of 27th March, 2020, 3PM (NZDT) to help businesses that need to shut down under Alert Level 4, pay their workers for an extended period of time. The scheme will support employers and their staff to maintain an employment connection and ensure an income for affected employees, even if the employee is unable to work any hours.

The scheme excludes state sector organisations. The new modifications introduced as of 27th March state that businesses accessing the scheme must still undertake best endeavours to pay employees 80% of their pre-COVID income. If that is not possible, in case of businesses which have no activity whatsoever during the shutdown, they must pass on at least the whole value of the wage subsidy to each affected worker. Businesses must also undertake to keep employees in employment for the period of the subsidy. In addition to this, the previous separate sick leave payment scheme has been folded into this Wage Subsidy Scheme.

The subsidy is $585.80 per week for a full-time employee (20 hours or more) or $350 per week for a part time employee (less than 20 hours).

The payment issued by the government will be made as a lumpsum, covering a period of twelve (12) weeks. This essentially means that employers will receive a payment of $7,029.60 for a full-time employee and $4200 for a part time employee.

There is no more a maximum amount of assistance (previously $150,000) which a business can apply for. The cap which had been placed initially was lifted, and there have been no further modifications to this criteria which means the modified scheme is also uncapped. Businesses can also make new claims for any employees that they did not apply for under the original scheme.

Employers will be eligible for the scheme if they can show a 30% revenue drop attributable to COVID-19. Before receiving a subsidy, employers must take measures to manage the implications of COVID-19 on their business. These measures might include (but are not limited to) talking with their banks and drawing on internal cash reserves.

How can you apply for it?

You can apply for the Wage Subsidy Scheme by filling up the application form by clicking on the link:

For employers

For self-employed individuals

In order to make a successful application for the wage subsidy scheme, kindly ensure you fill up the right form, or your application won’t go through and you won’t qualify for the scheme.

To ensure that you fit the eligibility criteria, please read the decleration form carefully before making your submission. It is important to note here, that signing the declaration form without meeting the eligibility criteria, will have criminal implications.

Declaration Form: https://www.workandincome.govt.nz/online-services/covid-19/wage-subsidy-declaration.html

 Here are some steps on how you can go about the application process:

Step 1:

While filling the form you are to select one of the below situations:

  • your staff are in self-isolation (or caring for others)
  • your business’s revenue has dropped due to COVID-19.

Step 2:

While applying online you will need to provide the following information:

  • your IRD number
  • your business name
  • your business address
  • the names of your employers
  • your employee IRD numbers
  • contact details for your business and employees

Step 3:

After receiving all the details, the government will check whether you qualify for the Wage Subsidy scheme. They may get in touch with you if they need further information regarding the application you’ve made, in which case they will contact you by phone.

Step 4:

If your process is approved:

  • you will receive an email and text to confirm that the application has been approved and a payment has been made.
  • you will receive the payment after a short duration

if the application is declined, you will also be notified of the same.

Tax Treatment for Businesses

The wage subsidy scheme, and the previous COVID-19 leave scheme, are not taxable income in the hands of the employer and the amounts received are exempt from GST. When the employer passes the subsidy on to the employee, the amounts are not tax deductible expenditure to the employer. PAYE should be deducted from the employee’s pay when it is paid out.

Tax Treatment for Individuals

Payments made under the subsidy scheme to those that are self-employed is taxable income.

What Happens If You’ve Already Applied for the Scheme before 27th March, 2020, at 3PM?

If a business has already applied to for the original scheme, they are required to continue to use the funding received to pay their employees for a full 12-week duration as agreed to in the initial application. Any applications made prior to 3PM, Friday, 27th March will be assessed against the original criteria of the subsidy scheme when it was announced.

Application made on the 27th of March post 4PM will have the new criteria and obligations applied to their application.

 

If you have any questions regarding the Wage Subsidy Scheme or how to apply for it, you can get in touch with us on +64-9-972-2236 or email us on info@jzr.co.nz

 

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