Latest COVID 19: Update The Small Business Cash Flow Scheme (SBCS) – 12 May 2020
Click the link below to open a new page for the most recent update as at 12 May 2020. This update is to do with The Small Business Cash Flow
COVID 19: Support for Small and Medium sized Enterprises - 15 April 2020
Click the link below to open a new page for the most recent update as at 15 April 2020. This update is to do with extra support for Small
and Medium sized businesses.
COVID 19: Update for Essential Workers Leave Support – 8 April 2020
COVID 19: Update for business – 3 April 2020
Click the link below to open a new page for the most recent update as at 3 April 2020. This update is to do with any obligations to file
GST and Tax and the relevant payment terms. It also outlines what your options are if you are unable to make tax payments on time.
COVID 19: Update for business – 29 March 2020
On 27 March 2020, Minister of Finance announced systematic changes to the Wage Subsidy and Leave Payment Scheme. We set out these changes below and outline frequently asked questions.
From 4pm 27 March, the Leave Payment Scheme has been absorbed into the Wage Subsidy Scheme and is no longer available for employers. Applications already submitted will continue to be processed and paid.
The government has made modifications to the Wage Subsidy Scheme to ensure people don’t lose their jobs during the national lockdown.
The Wage Subsidy Scheme is designed to support employers and their staff to maintain an employment connection to ensure an income for affected employees, even if the employee is unable to work any hours.
Who can get the Wage Subsidy?
All New Zealand employers who have been affected by COVID-19 are eligible to apply.
This includes the self-employed, sole traders and contractors.
- Your business is registered in NZ
- Your 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 with the same
month last year.
Your business has taken active steps to mitigate the impact of COVID-19 e.g. talking with your accountant or engaging with your bank.
- You must retain the employees named in your application for the period of the subsidy.
What can you get?
- $585.80 for people working 20 hours or more per week (full-time rate)
- $350.00 for people working less than 20 hours per week (part-time rate)
The subsidy is paid as a lump sum and covers 12 weeks per employee.
As an employer, what are my obligations under employment law at this time?
Your obligations under employment law haven’t changed.
What do I need to pay my staff?
If you are receiving the COVID-19 Wage Subsidy, you must make your “best efforts” to pay the employee named in your application, at least 80% of their usual wages. If that isn’t possible, you need to pay at least the subsidy rate.
If your business cannot afford to pay the 80% subsidy rate the employer and employee can negotiate an alternative approach. Such “best efforts” would need to be documented by the employer.
Do I have to pay Stat days as per normal?
Yes, as normal employment law still applies.
Normal employment law is still in play so you will need to pay stat days as per normal being 100% for the day.
If for example there is Good Friday coming up then you will pay Mon-Thursday at 80% (assuming that is what you are paying your employees) and 100% for Fri being the stat day.
There will effectively be two earnings line for that week.
E.g 40 hours a week at $30.00 an hour.
COVID-19 Leave (80%) 32 hours at 24.00 per hour $768.00
Stat Day 8 hours at 30.00 per hour $240.00
What if the employees’ wages are less than the Wage Subsidy?
You must pay them their usual wages. Any difference should be used for the wages of other affected staff.
If I am a shareholder in a business, can I apply for the Wage Subsidy?
If you work for the business and you are paid a wage, salary or draw an income (regular drawings) for the work you do for the business, you can apply for the wage subsidy.
As an employer, can I apply for the Wage Subsidy on behalf of my casual employee?
Yes. You can apply for the wage subsidy for any casual employee(s) that are employed by you at the time you apply and who would have been expected to work during the time you will receive the wage subsidy.
How is the Wage Subsidy treated for tax purposes?
You don’t have to pay GST or Income Tax on the wage subsidy. It is exempt from GST and classified as “excluded income“ for tax purposes. You will not be entitled to an income tax deduction for wages paid out of the wage subsidy.
Your employee will need to pay tax on their wage subsidy payment as its paid to them as part of their normal wages. This means its subject to the usual deductions e.g. PAYE, ACC, KiwiSaver, Student Loan & Child Support.
Where the subsidy is paid to a sole trader, shareholder-employee and partner who are responsible for their own taxes, the amount is taxable income.
How do I work out 80% of an employees’ wage?
White Snow Limited is only able to pay its employees 80% of their usual wage while the country is on national lockdown. This is how to calculate it.
Sarah works 40 hours a week and receives an hourly rate of $25.00 equal to $1,000.00 gross per week.
During this time, White Snow Limited will pay Sarah $800 gross per week (80% of usual wage).
$585.80 will come from the Wage Subsidy with White Snow Limited topping up $214.20 to ensure Sarah receives 80% of her usual wage.
What if the employees’ hours fluctuate and they work different hours each week?
If the employee works variable hours, you can use an average to work out what rate to apply for.
Use the average hours worked each week:
- Over the last 12 months, or
- Over the period they have been employed (if it’s less than 12 months)
Example – Self-employed dance teacher
Anna is a self-employed dance teacher who provides regular private lessons at home as well as at a local high school. Based on her forecast, she is expecting a 90% loss of income in April 2020 compared with April 2019. She does not employ any other dance instructors. Anna applies for the part-time wage subsidy as she works less than 20 hours a week and receives $4,200 wage subsidy form the Ministry of Social Development.
Anna is required to account for income tax on the wage subsidy, so she will include it in her individual income tax return.
Example – Company with 20 employees
Green Grass Limited has 20 full time employees. It has applied for the wage subsidy for each employee. Green Grass Limited is only able to pay its employees 80% of their regular wage, including the wage subsidy. The wage subsidy and (reduced) pay are processed by Green Grass Limited in the normal manner through its payroll system, and PAYE and KiwiSaver etc are deducted.
We are well positioned to provide advice and support to all our clients as we self-isolate as a country. This includes guiding your business through this unprecedented situation as they access government supports and entitlements. While our offices are closed, we are still open for business.
Should you need support during this challenging time, please get in contact with one of our partners.
Alan Macdonald – email@example.com or 021 324 527
Jack Perniskie – firstname.lastname@example.org or 03 208 1314
Erin Howes – email@example.com or 027 208 0262
Caleb Macdonald – firstname.lastname@example.org or 021 020 04636
Tim Walsh – email@example.com or 027 436 8663
If you have any general questions, feel free to use our contact us form on the website.