Part of the government’s $12.1 billion COVID-19 relief package targets wage subsidies. This assistance will support businesses in retaining their employees and helping them to manage cash flow challenges. The application needs to be lodged with the Ministry of Social Development (MSD) at www.workandincome.govt.nz/covid19support.
The subsidy will be paid to the employer at a flat rate of:
- $585.80 per employee per week for full-timers working 20 hours or more per week; or
- $350.00 per employee per week for people working less than 20 hours per week.
The subsidy is paid as a lump sum and covers 12 weeks, per employee.
There is no maximum for the amount of assistance that can be paid to a business.
The wage subsidy is “excluded income”, meaning it will not be taxable income. However, the portion of the wages and salaries cost covered by the subsidy will not be tax deductible expenditure for the employer. Wages and salaries continue to be subject to PAYE, student loan and KiwiSaver deductions (etc) in the normal manner. The government has also passed an Order in Council that ensures that the subsidy will not be subject to GST.
Businesses, sole traders, the self-employed, partnerships (one partner should apply on behalf of all of the partners), registered charities and incorporated societies are eligible for a wage subsidy if they meet the following criteria:
Business/employer must be registered and operating in New Zealand
This means that a business or not-for-profit organisation:
- Has a New Zealand Business Number (NZBN)*; and
- Are physically located in New Zealand; and
- Its employees legally work in New Zealand.
* If a sole trader, partnership or other entity does not have a NZBN, visit the NZBN website.
Employees must be legally working in New Zealand
“Legally working in New Zealand” means a person is both working in New Zealand and is legally entitled to work in New Zealand. A person is legally entitled to work in New Zealand if they:
- Are a New Zealand or Australian citizen (including a person born in the Cook Islands, Niue or Tokelau); or
- Have a New Zealand residence class visa; or
- Have a New Zealand work visa or a condition on their New Zealand temporary visa that allows them to work in New Zealand.
For more information, see: https://www.employment.govt.nz/starting-employment/right-to-work-in-new-zealand/
The business must have experienced a minimum 30% decline in actual revenue over the period of a month when compared with the same month last year, or a predicted future decline in revenue by at least 30%, and in either case that decline is related to COVID-19
This means a business has experienced a 30% decline in:
- actual revenue; or
- predicted revenue (e.g. for businesses who have seen a reduction in bookings such as accommodation providers); and
- that decline is related to COVID-19.
The business must experience this decline between 1 January 2020 and 9 June 2020.
Definition of revenue: revenue means the total amount of money a business has earned from its normal business activities, before expenses are deducted.
Determining a decline in revenue: to determine a decline in revenue, the business must compare one month’s revenue against the same month the previous year (e.g. February 2020 compared with February 2019). The revenue of the month in the affected period must be at least 30% less than it was in the month it was compared against.
Businesses operating for less than one year: where a business has been operating for less than one year, they must compare their revenue against a previous month that gives the best estimation of the revenue decline related to COVID-19.
Your business must have taken active steps to mitigate the impact of COVID-19
This could include activating their business continuity plan and seeking advice and support from:
- Their bank
- The Chamber of Commerce
- A relevant industry association
- The Regional Business Partner programme
You must make best efforts to retain employees. You must use your best endeavours to pay employees a minimum of 80% of their normal income for the subsidised period. If that is not possible, you must pay employees the full amount of the wage subsidy that they are entitled to (i.e. full-time or part-time subsidy).