Article:

Wage Subsidy FAQs

03 April 2020

FAQ's are updated every 48 hours. Please refer frequently for the most up to date information
Information included in this insight was last updated on 03.04.2020

 

How do I calculate whether revenue has dropped by 30% or more?

 

The employer/business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year.  That decline must be related to COVID-19 and must occur between January 2020 and 09 June 2020.

If the employer has been in operation for less than one year, and therefore cannot demonstrate a 30% decline in revenue on a year to year basis, they are able to use a previous month as the best estimation to demonstrate the loss (i.e. comparing February 2020 to March 2020).

Revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.

Practically we envisage that income will be calculated on the same basis as it was in the month against which the comparison is being made.

As some employers/businesses have only just closed their doors as a result of the upgrade in alert levels, the definition permits a prediction of future revenue.

 

What does it mean to take active steps to mitigate the impact of COVID-19?

 

Your business must have taken active steps to mitigate the impact of COVID-19

This includes:

  • activating your business continuity plan
  • drawing from cash reserves (when appropriate)
  • making an insurance claim
  • proactively engaging with your bank or lender

In addition, you could also seek advice and support from:

  • BDO
  • the Chamber of Commerce
  • a relevant industry association
  • the Regional Business Partner programme

 

What happens if I cannot continue to employ those for whom I applied for the subsidy?

 

Any employer applying for the wage subsidy after 3pm on Friday 27 March 2020 must now declare that they will retain any and all staff included on their subsidy application for the full 12 week period.

If you are unable to retain your employees for the period in which the subsidy is to be paid, then you may be liable to repay some or all of the subsidy received.

For employers who applied for the wage subsidy prior to Friday 27th March, you should consult your employment lawyers regarding individual employment agreements, and your legal obligations concerning minimum pay and redundancy before terminating employment.

The ability to communicate clearly and effectively with employees is crucial during this time.

 

How do I treat the subsidy with regards to my payroll?

 

The payment to staff is quite separate to the receipt of the subsidy. 

The receipt of the subsidy is exempt from tax in the hands of the employer.

Any wage payments made to employees will form part of their taxable income and, regardless of the amount to be paid, should have the appropriate PAYE, KiwiSaver etc. deductions applied. The net payment is what goes to the employees.

The payment to the employee is non-deductible to the employer, up to the amount of the wage subsidy received. Therefore, from an income tax perspective, businesses will need to be able to clearly identify the amount of remuneration paid to employees that had been generated from the wage subsidy.

 

  Subsidy Type
Wage Leave
Taxable income for employer? No No
Subsidy attract GST for employer? No No
When employer pays employee, is the employee subject to tax? Yes Yes (i.e. Employer deducts paye/KS etc when they pay staff as normal but it will be tricky to seperate things in the normal payroll. 
Is the subsidy deductible to employer when paid to employee? No No 

 

Does my business or legal structure preclude me from receiving the subsidy?

 

At the highest level, the intention of the wage subsidy is to keep people employed through these difficult times.

The specific legal structure of your business, or specific employee & contractor agreements, should not preclude you from being eligible.

The wage subsidy is designed to be accessible by all NZ employers with NZ employees.

So, you can be an incorporated society, trust, charity, etc and still qualify. A sole trader or contractor will claim for themselves and any staff that they employ.


The wage subsidy will not apply to any state sector employers.

What are State Sector Employers?

State sector employers include the following;

  • Government agencies
  • Crown entities eg Kāinga Ora, ACC
  • Schools
  • Tertiary Education Institutions such as:
    • Universities
    • Polytechnics/Institutes of Technology
    • Wānanga

 

I don’t have any evidence to support my claim for the wage subsidy. What do I need to do?

 

When making the application you are signing a declaration that the application has been made in accordance with the eligibility criteria.

If you have provided false or misleading information, or receive any subsidy or payment that you were not entitled to receive, you may be subject to an investigation including for offences under the Crimes Act 1961.

Given this declaration, it is important that you review the criteria to ensure that you have evidence to support your claim.

Evidence will include documentation on how you arrived at a 30% drop in revenue – this should be self-evident for most employers who are unable to carry on their business during the Level 4 COVID-19 lock down period.

The active steps criteria will mainly include seeking advice from a third party, but may also incorporate all internal actions that assist with mitigating the impacts of COVID-19.

Therefore while you may not be required to submit the evidence with your application, it is crucial you get this information together as all payments made by the MSD are subject to an audit. Payments claimed in error may be subject to repayment.

 

Should I apply for this or ask my financial adviser to make the application?

 

We encourage you to complete the declaration (you need to sign the declaration) and seek guidance from us if you require.

I previously made an application for only some of my employees due to the subsidy cap that was in place. Do I need to apply for my remaining employees now?

 

Yes. The cap of $150,000 per business no longer applies; therefore all employers, contractors, sole traders, self-employed people, registered charities and incorporated societies can apply, without limit.

If you included all of your employees on your wage subsidy application, and MSD has capped the amount paid due to being over the cap, you don’t need to do anything. MSD will top up the difference and make payment to you directly.

If you have not applied for the wage subsidy in respect of all staff,you will now need to do this by submitting an additional application listing only those staff whom were not included on your previous application.

 

I applied for the wage subsidy, but accidentally left off one of my part-time employees. How do I get the subsidy for them now, as it says you can only apply once?

 

We understand you will need to contact the MSD directly and ask them to add on the additional employee.

You can do this via the Work and Income helpline on 0800 40 80 40.

You can also use the MSD Feedback Form and select ‘Other Enquiries’

 

How long does it take to receive the subsidy?

 

WINZ administers the subsidies and while they have advised that they are making payments as quickly as they can they are not providing details of any particular timeframe.

The experience of our clients so far is that waiting times can be between 2 to 7 working days.

 

 

I don't have an NZBN (New Zealand Business Number), can I still apply for the COVID-19 Wage Subsidy?

 

Entities that are not likely to have an NZBN include Trusts, Partnerships and Sole Traders.

MBIE have advised they are trying to speed up the processing of NZBN applications.

NZBN has been changed to an 'optional' rather than 'compulsory' field in the wage subsidy application process. 

The other option for this field is to include 13 x "0"s in the NZBN box.

Apply for an NZBN

 

 

I am a self-employed person and receiving the full-time wage subsidy or $585 per week. Is the amount received for the wage subsidy treated as income?

 

Yes, the wage subsidy received will be treated as taxable income to the self-employed person, as it is a payment that replaces loss of earnings.

 

I applied for the wage subsidy on 26th March but didn’t receive the subsidy until 1st April – am I bound by the old or new declaration?

 

The declaration for the wage subsidy was amended on 27th March 2020 at 4pm.

You will be bound by the declaration you signed at the time of the application, noting that the declaration changed significantly on the above date.

It is not relevant when you actually receive the subsidy.

I am a new business, so I have no revenue for the prior year to test my eligibility against for the wage subsidy. What do I do?

 

Businesses that can demonstrate a 30% decline in revenue attributable to COVID-19, and meet the other eligibility criteria can still apply for the wage subsidy. The 30% decline in revenue should be compared to a similar month of trading (e.g. comparing February 2020 to March 2020).

 

Are employers expected to return the extra subsidies back to Work and Income where employees are working for a period of less than 12 weeks?

 

This may include Seasonal workers and Fixed Term Employees who are due to finish work in the coming weeks.

If you are aware employees will not be working for the full 12 week period at the time of approving the declaration, then employers should make their best estimate of the period the wage subsidy is actually required for.

In cases where you receive more of the wage subsidy than what is required, then be prepared for repayment of the excess. You can exercise this by using the following email link below.

You can email COVID19subsidy_overpayment@msd.govt.nz to disclose any mistake or overpayment.

You will need to include the following information in your email: 

  • Business name
  • IRD number
  • New Zealand Business Number (NZBN), if you have one
  • Phone number
  • Email address
  • Postal address.
  • And advise the amount overpaid and why you need to pay it back.

If during the 12-week period, the business ceases to be viable, and I am forced to make some (or all) of my employees redundant before the end of the 12-week period, what effect will this have on the wage subsidy I received?

 

This would be a change in circumstance impacting on the eligibility for the subsidy.

MSD should be notified regarding the change, and the unused portion of the wage subsidy should be put aside to be repaid.

You can email COVID19subsidy_overpayment@msd.govt.nz  to disclose any mistake or overpayment.

  • You will need to include the following information in your email: 
  • Business name
  • IRD number
  • New Zealand Business Number (NZBN), if you have one
  • Phone number
  • Email address
  • Postal address
  • And advise the amount overpaid and why you need to pay it back.

 

I claimed the leave payment last week and received the funds into my business. I was meant to apply for the wage subsidy. What do I do? 

 

Firstly, you will need to acknowledge that the Leave Payment was claimed in error. 

You can email COVID19subsidy_overpayment@msd.govt.nz  to disclose any mistake or overpayment. 

You will need to include the following information in your email:  

  • Business name 
  • IRD number 
  • New Zealand Business Number (NZBN), if you have one 
  • Phone number 
  • Email address 
  • Postal address. 
  • And advise the amount overpaid and why you need to pay it back. 

 

You can then apply for the wage subsidy under the normal application process. 

Please note that MSD may advise a different course of action throughout this process, and this has been supplied as a guideline only. 

 

I am a beneficiary in a Trust and would usually receive a distribution on a regular basis. The Trust's revenue has been impacted by COVID-19 and I am no longer receiving my regular distribution. Do I qualify for the wages subsidy? 

 

Income allocated to the beneficiary of a Trust is generally discretionary. 

The income is not allocated due to personal efforts or work undertaken on behalf of the Trust. 

With regard to the definition of an employee (per the declaration), a beneficiary would not be included, and is therefore not able to receive this subsidy. 

 

I don't have a copy of the declaration I signed; how can I get one?

 

The declarations are available online using the following link; 

 

I have 200 employees and the application form online will take me a long time to fill out. Is there a different way of submitting my application for the wage subsidy? 

 

Yes – there is a large employer form you can use to apply for the wage subsidy. 

You can follow the instructions set out on Work and Income's website 

 

What are the circumstances where I would need to repay the wage subsidy? 

 

  • you no longer meet the criteria for the subsidy (eg: where you have estimated your turnover will be down by 30% but this has not occurred)
  • you are no longer using the subsidy to retain and pay your employees 
  • you received insurance for costs which were also covered by the wage subsidy 
  • you provided false or misleading information in your application for the wage subsidy 

 

I have an employee who works variable hours. How do I calculate their ordinary pay? 

 

In this instance, you should look at the number of hours the employee would usually work for the business and calculate the average. 

Use the average hours worked each week: 

  • over the last 12 months, or 
  • over the period of time they have been employed (if it is less than 12 months). 

If the average hours are: 

  • 20 or more, apply for the full-time rate 
  • less than 20, apply for the part-time rate. 

 


Please contact your local adviser for specific advice.