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COVID-19 wage subsidy process

Wondering how the wage subsidy works? We have provided a process diagram and definitions.

Covid 19 Wage subsidy table

Decline in revenue

What does a 30% decline in revenue mean?

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 January 2020 and 9 June 2020.

 

Definition of revenue

Revenue is the total amount of money a business has earned from its normal business activities, before expenses are deducted.

 

Determining a decline in revenue

Business > one year

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.

Business < one year

Where a business has been operating for less than a year, they must compare their revenue against a previous month that gives the best estimation of the revenue decline related to COVID-19.

 

New Zealand business

What does registered and operating in New Zealand mean?

This means that a business is:

  • registered with the New Zealand Companies Office, and
  • physically located in New Zealand, and
  • their employees legally work in New Zealand.

 

Sole Traders/Self-employed/Contractors

Not required to be registered with the New Zealand Companies Office, but must have:

  • a personal IRD number for paying income tax and GST, and
  • government licences and permits for their business needs, and
  • qualifications or registrations for their trade or profession, and
  • must still meet the requirements to be physically located and legally working in New Zealand

 

Legally working in New Zealand

This means a person is both:
a) working in New Zealand, and
b) 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.

 

Income tax

The money you receive and pay onto employees as part of the wage subsidy is not taxable, and no deduction is allowed.

If you receive the wage subsidy for yourself, i.e. you are self employed or a sole trader, then the wage subsidy is taxable in the usual way.

If you are an employer paying to your employees, then withhold PAYE in the usual way.

 

GST

The IRD has confirmed to us that there is no GST on the subsidy, but it may be that the law needs to be changed to effect this.

 

Other points

  • Maximum $150,000 per business (note: as of 23 March the $150,000 cap is removed)
  • Paid as a lump sum
  • Covers 12 weeks per employee
  • For wages only
  • Can only apply once per business

 

How to apply

Visit the Work and Income website and complete the applicable online form.

 

DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.

 

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