Advice for Business Owners: Coping with COVID-19

Lizelle Doughty

If you are self-employed or a shareholder employee and you are going to suffer a downturn of income you are entitled to apply for the wage subsidy.  You have to apply for each of your staff as well.

If you have staff on Withholding Tax, they need to apply for themselves.

https://www.workandincome.govt.nz/products/a-z-benefits/covid-19-support.html

https://www.employment.govt.nz/leave-and-holidays/other-types-of-leave/coronavirus-workplace/wage-subsidy/

Here is a bit more information that one of our tax specialists have managed to pass on to us.

Additional information: detailed information on the income tax and GST treatment of the COVID-19 wage subsidies and leave payments are shown below. It appears the questions & answers will be on the IRD’s website next week.

Below is a Q&A that IR has released on the Government’s Covid-19 wage and leave subsidy payments. The Q&As should be on the IR’s website next week, at which time I will forward you all the link. IR will be adding to the Q&As over time.

Q: Is the wage subsidy payment subject to GST?
A: No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)

Q: Is the wage subsidy paid to the employer taxable?
A: No – It is excluded income (Section CX 47 ITA).

Q Is the wage subsidy deductible when paid by employer as part of wages to employee?
A No – it is not deductible

Q Is the wage subsidy taxable to employee?
A Yes – As it is included as part of their normal wages it is subject to the usual PAYE, Student
Loan, Kiwisaver deductions, etc.

Q: Is the leave payment for self-isolation subject to GST?
A: No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)

Q: Is the leave payment for self-isolation paid to employees or self-employed persons subject
to tax?
A: Yes – It is paid to replace taxable income so is subject to tax.

The wage subsidy is not taxable!

Q1 – is the payment taxable? The helpline said yes, but the facts/info online don’t say anything in terms of tax/PAYE etc. It just says that the $585.80 ‘must be passed onto employees in full’. Do I process it through the payroll?
A: As the wage subsidy is a subsidy to the employer to help them fund an employee’s wages it is included as part of the employees normal wages and all deductions of PAYE, Kiwisaver, Student Loans, etc are made as normal. If the employees are paid the same wages as previously their pay and deductions on their payslip should be the same.

Q2 – is there a limit to top up the payment? The helpline had no idea, and I can’t find anything about it in the facts/info online either, for example, an employee may normally get $1000 gross each week…so are they able to use annual leave to top up the $585.80 so they’re receiving close to their normal weekly wage?
A: As the Ministry of Social Development (MSD) are making the payment, this enquiry should be made to them. However, whether you top it up with cash payments or annual leave is probably between you and your employee. Although to qualify for the subsidy the MSD information states the employer must make the best efforts to pay an employee a minimum of 80% of their normal income for the subsidised period.

Q3 – if they are an NZ-based employee but overseas and are having to self-isolate and cannot work, can the employer access the support for this type of employee?
A: This is also an enquiry for MSD. Note however that the information on their website states that to be eligible, the employee was legally working for their employer at the time they decide to self-isolate, and they were expected to work for the period of self-isolation.

Stay Safe