Tax Talk | US IRS stimulus payments
Due to the unprecedented circumstances currently upon us because of COVID-19 governments around the world...
The government has acted quickly and decisively, ensuring that New Zealanders can concentrate more on their health and less on their finances.
Unfortunately, it can take a while to iron out the details, raising more questions. As your trusted advisors, we are here to help.
Do you have a business question?
Please use our form to ask any questions you may have as a business owner or employer, check in regularly, as your question may be added to our FAQ (your name will not be shared).
As claims can be audited, please note the following:
Any claims made in error may be subject to repayment.
Current indications are between 2 and 7 working days.
A business must experience a 30% decline in:
One month’s revenue must be compared against the same month the previous year. If you are a new business (i.e. less than a year) revenue can be compared against a previous month that gives the best estimation of revenue decline.
Revenue means the total amount of money earned from its normal business activities, before expenses are deducted.
Practically this means you will need to measure your revenue the same way each month to establish a decline.
We recommend contacting MSD directly if you have made any errors.
As the $150,000 cap has been removed, if you originally applied for a larger amount, MSD will automatically top you up.
You are also able to apply for an additional wage subsidy if you originally limited your application $150,000 but needed more.
You must make best endeavours to pay employees a minimum of 80% of their wages ‘ordinary’ wages and salary for the named employees for the subsidised period. Best endeavours is not defined, but clearly business conditions can change and events regarding COVID-19 are always evolving and businesses need to respond. You must retain the employees named in your application and cannot unlawfully compel or require them to use their leave entitlements for the period you receive the subsidy.
At a minimum, the government expects the full value of the subsidy (after deducting PAYE etc) to be passed on to workers.
Note, you must have discussed your application with the named employees and employees must have consented to the application and any changes to their working arrangements (including reduced hours or wages).
As long as the person is a permanent part timer, there is an entitlement to the subsidy. The purpose of the subsidy is to enable people to remain employed, rather than be made redundant.
The full $350 wage subsidy can be claimed, even if the ordinary pay of your part time employee is less. However, it is expected the employee would be paid their full wage and any surplus would be used to support the wages of other employees.
NOTE: a permanent part timer includes contractors, casual staff or fixed term workers if they were scheduled to work during the lockdown.
Generally contractors would apply in their own right. If circumstances make this difficult, we recommend confirming the number of hours worked, and the conditions of the contract for aspects such as guaranteed hours of work. We can assist with contract reviews.
This will be the same for employees on commission, seasonal workers and casual employees.
You will need to apply for an NZBN under 'your trust name' which you can do here:
You will need to scroll down and click “Operating a Trust? Get your NZBN here”
The subsidy is broadly available and is designed to support employers to retain employees regardless of structure.
Unfortunately full time investors are unlikely to meet the criteria for relief under the government’s wage subsidy package.
However, there are several other items where full time investors may obtain relief. These include:
All the above are subject to specific criteria, please discuss this with your advisor.
From 3pm on 27 March 2020, the COVID-19 Leave Payment is no longer available for employers. Therefore, if you had not applied for the leave subsidy prior to this date, you will not be able to make a leave payment claim.
It is our view this decision was made to prevent businesses that had already applied for the wage subsidy, applying for the leave subsidy as well. As majority of the country are now in self-isolation, the leave scheme was no longer fit for purpose. The leave subsidy is now included under the wage subsidy scheme. Leave payments for those with COVID-19 or those caring for the sick or self-isolated (an unbale to work) will still be made, however an employee will not receive a sick leave payment, as well as a wage subsidy payment.
...Does the employer pay gross $585 to the employee via payroll, is the $585 net or is it expected they will pay regular salary?
The $585.80 has to be paid via payroll and will attract PAYE. To receive the subsidy, the employer must commit to using their best endeavours (if they applied for the subsidy from 4 pm 27 March onwards) to pay at least 80% of the employee’s ordinary wages over the subsidy period or at least pay the full amount of the subsidy to the employee. Which every option applies the $585.80 will be taxed.
...as long as I am trying to give all employees 80 - 90% of their normal weekly income?
It is your obligation to use the wage subsidy to retain and pay your employees. You must use your best endeavours to pay at least 80 per cent of each named employee’s wages and salary. Furthermore, the Government has announced that the entire wage subsidy must be passed on to the employee for which it was applied for. However, where the ordinary wages or salary of an employee is lawfully below the amount of the subsidy, you may only pay the employee their normal wage or salary.
It is our view that the money you receive is connected to the number of employees you applied for but is not directly tied to them. Therefore, you may offset the money left over from those who do not usually earn $585 a week to others who earn over $585 a week. As per the government guidelines, the wage subsidy is designed to keep staff employed during this period of business disruption, therefore, any difference should be used for the wages of other affected staff.
...(hospitality industry) are we still obliged to pay them minimum 80% of the salary as per the original wage subsidy agreement?
The wage subsidy requires that businesses try their hardest to pay the employees named in the wage subsidy application, at least 80% of their normal wages. In some cases, this will require the employer to top up the amount given by the government.
However, if a business is unable to top up this amount to 80% due to the effects of Alert Level 4 on their business, then it is satisfactory that the employer just pass on the wage subsidy payment amount owed to the employees via payroll. It is likely that this scenario applies to most staff in the hospitality industry who are unable to work from home.
The bottom line is a minimum of $585.80 (for people working 20 hours or more per week) or $350.00 (for people working less than 20 hours per week) should be paid to the employee for the 12 week period covered by the wage subsidy.
You will need to repay some or all the COVID-19 Wage Subsidy if:
You can check the obligations here:
You can also make a repayment if you think you need to pay back some or all of the COVID-19 Wage Subsidy. This could be because you were overpaid or made a mistake on your application.
How to repay the subsidy
You can email COVID19subsidy_overpayment@msd.govt.nz with your:
You’ll also need to tell them:
Once they’ve received your email, they’ll contact you to confirm the refund amount and how you can make the repayment.
We understand if the subsidy was obtained in good faith there will be no adverse consequences, apart from most likely repaying the subsidy. However, ensure good records are kept to support your position.
Please also contact us, our Human Resources department will be able to assist with employer obligations in respect of redundancies.
Seeking advice and support from:
Usual FBT rules apply during this time; if you previously paid FBT, then you are probably going to be required to continue to pay FBT. FBT on a motor vehicle arises on the basis a vehicle is available for private use, not whether a vehicle is actually used for private purposes. Home to work travel is a private use.
FBT can be complex, especially where vehicles are provided to enable staff to provide services to the operation of plant and machinery, the supply of energy or fuel or emergency services to the health and safety of the public. For non-essential workers there may be scope to argue their car is not available because of the lockdown. We recommend discussing any specific details with your regular advisor.
No. There will be a new Essential Leave Scheme available as of Monday 6 April 12pm. The scheme is similar to that of the wage subsidy but enables businesses that may not qualify for the wage subsidy to be able to support their essential workers. The criteria and details can be found here: https://www.beehive.govt.nz/release/essential-workers-leave-scheme-established
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