Tax Talk | US IRS stimulus payments
Due to the unprecedented circumstances currently upon us because of COVID-19 governments around the world...
With the government’s announcement that Level 2 restrictions will remain in force until Monday in Auckland, the resurgence support payment has been activated, and the wage subsidy is not in effect.
NOTE: An earlier edition of this item incorrectly noted the GST consequences of the resurgence support payment were similar to the wage subsidy. A corrected comment is below.
In response to criticism in past lockdowns that business was not being provided with enough support to pay other bills, the government has provided the Resurgence Support Payment. This support payment is in the form of a grant and consists of a base payment of $1,500 per applicant, plus $400 per full time equivalent (FTE) staff member up to a cap of 50 FTEs. This means a business can receive a grant of up to $21,500. Key eligibility criteria are:
There is no restriction on what the funds can be used for, unlike the wage subsidy. Business could therefore use this to pay rent, cover the cost of stock that needs to be disposed of due to trading limitations, and so on. Any size business can apply for the resurgence support payment.
Unlike the wage subsidy, the resurgence support payment is governed by the Tax Administration Act. This means Inland Revenue can undertake audits and any overpayments will be subject to the usual penalties and use of money interest regime.
The resurgence support payment is provided once every time restrictions are put in place. Accordingly, a business could apply for the resurgence support payment now, and then if restrictions were put in place again in for example, six months time, they would be able to apply for the resurgence support payment again.
The income tax and GST consequences of the resurgence support payment are similar to those for the wage subsidy.
Note: The income tax consequences of the resurgence support payment are similar to those for the wage subsidy. For GST registered businesses, the resurgence support payment needs to be included in the GST return, but this means an input tax claim can be made for expenditure incurred (where applicable).
Given many businesses are currently unable to trade, or are subject to practical limitations on trading, you may be thinking of altering employee hours and/or wages and salaries. Extreme care must be taken if your business wishes to do this, as usual employment law continues to apply. The key requirement is that there must be consultation with employees to obtain their consent to any changes in conditions. Baker Tilly Staples Rodway have a team of HR specialists who can assist with any HR queries.
We anticipate the resurgence support payment application will be similar to the wage subsidy application that many businesses are now well versed in.
This new payment is welcome for small businesses who are impacted by alert level changes, particularly in the hospitality and retail industries, where there are significant overheads.
Given the legal structure of the resurgence support payment, expect that there will be significant audit activity undertaken. Documents evidencing the decline in revenue should be kept, especially where there is reliance on comparable periods for new and high growth businesses. Your Baker Tilly Staples Rodway advisor can assist in reviewing calculations if needed.
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