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A Covisory Update for COVID-19 Payments

Tax Treatment for COVID-19 Wage Subsidy and Leave Payments
Source: Inland Revenue

Inland Revenue has issued the following Questions and Answers with respect to the wage subsidy and leave payments made the Government in response to COVID-19.

Is the wage subsidy subject to GST?
No - An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii) of the GST Act 1985).

Is the wage subsidy paid to the employer taxable?
No - It is excluded income (Section CX 47 of the Income Tax Act 2007).

Is the wage subsidy deductible when paid by the employer as part of wages to the employee?
No – it is not deductible.

Is the wage subsidy taxable to employee?
Yes – As it is included as part of their normal wages it is subject to the usual PAYE, Student Loan, Kiwisaver deductions, etc.

Is the leave payment for self-isolation subject to GST?
No - An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act).

Is the leave payment for self-isolation paid to employees or self-employed persons subject to tax?
Yes - It is paid to replace taxable income so is subject to tax.

Example

      • An Employer receives the wage subsidy of $582 per week for an employee who is normally paid $1,000 per week.
      • The employer is not subject to GST or Income Tax on receipt of the payment.
      • The employee receives their normal weekly wage of $1,000 less PAYE and any other deductions.

 

Mortgage Holiday for Homeowners and Businesses and Loan Scheme
Source: New Zealand Government

Announced on the 24th March 2020, the New Zealand Government jointly with the major banks and the Reserve Bank have put together a major support package for Homeowners and Businesses affected by COVID-19.

The Package includes:

      • a six-month principal and interest payment holiday for mortgage holders and small and medium-sized customers whose incomes have been affected by the economic disruption from COVID-19.
      • a $6.25 billion “business finance guarantee scheme”, providing short-term credit, for small and medium-sized businesses to protect jobs and support the economy.

While specific details of the package are being finalised as a matter of urgency, it will apply to businesses with a turnover of between $250,000 and $80 million per annum. There will be:

      • a limit of $500,000 per loan, and
      • the loans will be for a maximum of three years.

The Government expects banks to make these details public over the next few days.


The Reserve Bank has agreed to help banks put this in place with appropriate capital rules. In addition, it has decided to reduce banks “core funding ratios” from 75% to 50%, further helping banks to make credit available. The Government will carry 80% of the credit risk, with the other 20% to be carried by the banks.

 
ACC - Information for Businesses
Source: ACC

In response to COVID-19, the Accident Compensation Corporation (ACC) has advised that they are closing their branches but are still available to help. The ACC acknowledges the difficult times being experienced by many businesses and will discuss options if businesses are unsure whether they are able to meet their ACC levy obligations. The following information was issued on 23 March 2020:

If you have a levy owing
If you currently have an outstanding amount owing to ACC and you’re unable to make a payment due to hardship, please contact the ACC Collections and Recovery Team on:
• Phone: 0800 729 538
• Email: business@acc.co.nz
• To see if you have an outstanding amount owing, register or log in to MyACC for Business

If you’re no longer in business
If you’re no longer in business, please let ACC know through MyACC for Business or by using their online form to ensure you don’t receive an incorrect invoice. Please note, you need to do this even if you’ve notified Inland Revenue.
If you’re yet to receive an invoice, there is nothing you need to do just yet. Call ACC once you have your invoice and we can discuss options.
• Phone: 0800 222 776

 

Wage Subsidy Cap Removed - Information for Businesses and Self Employed
Source: Work and Income and New Zealand Government

The Government announced on the 23rd March 2020 that it has removed the $150,000 per business cap on wage subsidies that can be paid to employers affected by COVID-19. This announcement increases the expected cost of the scheme from $5.1 billion to $9.3 billion.

The wage subsidies scheme applies to ALL New Zealand employers, contractors, sole traders, self-employed people, registered charities and incorporated societies. All such entities can apply for a wage subsidy for their staff.

      • Those who have already applied for and been granted the wage subsidy for their employees (and had the cap applied) do not need to do anything further, as the Ministry for Social Development will top up the difference.
      • Those who have applied for the wage subsidy for staff, and claimed only enough to meet the cap, can reapply for any additional (above the cap) amount.
      • New businesses (eg that are less than a year old) and high growth firms (eg firms that have had a significant increase in revenue) are also eligible for the wage subsidy scheme. They need to demonstrate the revenue loss assessment against a similar time period, eg a 30% loss of income, attributable to COVID-19, in March 2020 compared to January 2020.
      • Self-employed people with variable monthly incomes are eligible if can demonstrate the revenue loss assessment against the previous year’s monthly average (eg 30% loss of income attributable to COVID-19 comparing March 2020 to the average monthly income in the period March 2019 to March 2020).

Other criteria still apply, including the 30% revenue reduction and for businesses, on their best endeavours, to maintain their named employees at 80% of their pre-COVID income. The same 12-week period applies to the wage subsidy scheme. The new criteria was applied from midnight 23rd March 2020.