COVID-19 Wage Subsidy: making sense of it with a simple breakdown
We know this is a very stressful time for everyone and you all want to act as quickly as possible to make sense of the COVID-19 wage subsidy and get it underway. The frustrating part for us is that the information has been minimal and often conflicting, and we have felt a little like headless chickens as we try to disseminate and understand the information.It’s very unusual times and without legislation or guidance on who things will be administered to, makes our jobs extremely difficult, but hopefully, we are now at a point where this will answer your queries and put you on the right path to weather the situation. We are all in the same boat and provided your meet the criteria, we’ll just have to manage the reporting/checking down the track.
Wage Subsidy
The wording of this is a little confusing, but it is designed to support business who are faced with laying off staff or reducing hours due to the impact of COVID-19.If you are an employer, contractor, sole trader or self-employed you can apply. This is the subsidy we believe the majority of people will be applying for.
What do we need to know about applying for Wage Subsidy?
The Wage Subsidy is based on a trust system, if you apply you will get it! So make sure you have checked you qualify before submitting the application.As the full legislation is only being written we do not know of all the fishhooks, but you can only do the best with what we currently have.Here is the link for the Employer application. You will need consent from your employees to apply. If you would like a template for this please contact us here.Here is the application link for a sole trader:
Can Legacy apply on my behalf?
No, sorry we cannot, you need to make the declaration yourself.
Where can I find my NZBN number?
If you are a company you will automatically have one of these. You can find your NZBN number here. Search for your company name, it’s the 13 digit number you can copy and paste.
What if I don’t have a NZBN number and one is required?
You can apply here for a NZBN number. We are not sure how long this will take. You need a RealMe login, we can do this on your behalf so please contact us.
How much will I get?
It is a flat rate of $585.80 for people working 20 hours or more and $350 for people working less than 20 hours per week. It is paid as a lump sum and covers 12 weeks per employee.
I’m a shareholder employee, do I apply for myself?
Our understanding is that you do qualify, however you may want to consider paying yourself through the PAYE system with your employees for at least the $585.80.
Do I pay tax or GST on the subsidy I receive as an employer?
The simple answer is no, it will be exempt from GST and is classified as excluded income.
Does an employee need to pay tax on a wage subsidy payment?
Yes, it is paid as their normal wages so is subject to the usual PAYE, Student Loan, Kiwisaver reductions, etc.
I’m self-employed, do I have to pay tax if I receive a leave payment because I’m in isolation?
Yes, it will be treated as income for tax purposes.
What does a 30% decline in revenue mean for my application?
It means your business has experienced a 30% decline in actual revenue or predicted revenue over a period of a month and the decline is related to COVID-19. It must experience this decline between January 2020 and 9 June 2020.
What am I required to do with paying staff?
As an employer, you must make best endeavours to retain the named employees in your application and pay them a minimum of 80% of their normal wages/salary for the duration of the subsidy period, which is 12 weeks. This is normal pay, not sick or annual leave.An example would be this:
My employee earns $1,000 per week and I’ve received $585.80 subsidy for them. I must pay them a minimum of $800, which is taxed through the PAYE system as it usually is.If my employee earns $2,000 per week and I’ve received $585.80 subsidy for them, I must pay them a minimum of $1,600 as normal pay.
If you are discussing topping up to the 100% with annual or sick leave then you need to do this separately and consult with your employment agreements.For some employees, you may want to consider if applying for the wage subsidy is a good idea. Once you have applied for that person, the obligation is on you to pay them. If this is an area that you are concerned about, please call us.
I have tax coming up and I’m unable to pay this?
The IRD will be providing some relief. The messaging we are receiving from IRD is
“if your business is unable to pay its taxes on time due to the impact of COVID-19, we understand you don’t need to contact us right now”.
We do have some options for utilising Tax Traders to push out terminal tax to June 2020 and the upcoming 7 May provisional tax can be pushed out further. When you receive your tax notice please contact us and we can arrange.
How does this all relate to me specifically, what is my checklist?
Sole Traders / Contractors
Completed the Sole Trader Subsidy Application https://services.workandincome.govt.nz/ess/trader_applications/newEnsure that when I receive my subsidy I’m aware there will be tax owing on this.
Employers
Checked that I fit under the criteria for applying for the subsidy by:
I am a registered business (have an NZBN number)
My employees are legally working in NZ
The business has experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year and the decline is related to COVID-19
I have taken active steps to mitigate the impact of COVID-19
I am making the best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period of 12 weeks
Obtained consent from my employees to apply for the subsidyIncluded myself as a shareholder in my applicationApplied for the wage subsidy online hereUnderstand that I pay my employees 80% of their normal salary, not sick or annual, and this is paid through the PAYE systemI should consider paying the shareholder-employees through the PAYE system also I hope this is helpful and gives you some quick reference sites to access.If anyone would like further clarification or more information on the above, please contact me here.Until then, stay safe, stay home and stay in your bubble! Here are some resources that will find helpful and informative:More information on Level 3 here:Guidance for essential businesses here:Business support during COVID-19EBOP Chamber COVID-19 support