Covid 19 Wage Subsidy and the Resurgence Support Payments
Wage Subsidy Scheme
The declaration for this scheme is substantially more detailed than in the past. It states that businesses must prepare and maintain information to support and demonstrate how the decline in revenue was attributable to the move to Alert Level 4 on 17 August 2021. This includes:
• dates of the affected revenue period and comparison period
• amount of revenue earned in each period
• how the revenue drop has been calculated
Included in this declaration it must show the business has taken active steps to mitigate the impact of the alert level change such as using cash reserves or being in discussion with their bank on the various options available.
The declaration also explicitly states any businesses who receive the wage subsidy may not make any changes to employment agreements with out the written agreement of the relevant employee. The business may not unlawfully compel or require any of the named employees to use their leave entitlements for the period they receive the subsidy in respect of those employees.
Also, a timely reminder that employers must have written authorisation from their employees to be able to make a claim for the wage subsidy on their behalf.
Revenue Test and Eligibility Criteria
Some more detailed information has also been provided for meeting the wage subsidy revenue test. These are as follows:
• Highly seasonal business can instead compare the 14-day period against the same period in 2020 or 2019.
• Start-ups – can include a fall in projected capital income as revenue if certain tests are satisfied.
• Commonly owned groups – employing entity must claim but the revenue test must be considered across the whole business.
• When comparing period you must exclude any amounts paid from previous wage subsidies or other Covid 19 support payments.
Resurgence Support Payments (RSP)
Inland Revenue have also released more detailed information regarding the eligibility criteria for the Resurgence Support Payment. These are as follows:
- Applicants must have experienced a decrease of revenue or capital-raising ability of at least 30% due to the increase in alert level. (If the applicant is part of a commonly owned group this 30% decrease also needs to be satisfied across the group as a whole.)
- Businesses and organisations (including sole traders) must have been in business for at least 6 months.
- The business or organisation must be considered viable and ongoing.
- Charities and not-for-profit organisations may be entitled to the RSP, provided they meet the other eligibility requirements.
- Income that is received passively – such as interest and dividends, and all forms of residential and commercial rent – is excluded from the measurement of revenue.
- Your business must be physically present in New Zealand.
- Applicants must be 18 years or older.
- Businesses and organisations (including sole traders) must have a New Zealand Business Number.
There are various scenarios explained by Inland Revenue in the below link. One particularly relevant scenario to note is for a business that invoices for work once it is completed. This example re-iterates the fact that any billable time worked during the alert level period must be factored into the income reduction calculation, not just what has been invoiced during the alert level period.
When coding these transactions for GST – the RSP includes GST but the wage subsidy doesn’t.
For more information, please use the below links.
Please contact our team if you have any queries or wish to clarify anything contained in this newsletter.