Since this post was written the New Zealand Government has changed the rules around the scheme we’ve reviewed these changes in this blog post.
Our first wages subsidy FAQ was very well received, so we decided to make a sequel.
Since most sequels suck, we have named this after what is unquestionably the greatest sequel of all time. We’ve set the bar high for ourselves, so hopefully we deliver.
Getting official guidance is tough as MSD and IRD are understandably overloaded, so therefore we have been largely left to piece through this ourselves. Therefore, we must stress that much of the content that follows is our opinion and that MSD or IRD may not agree. However, we are doing the best to comply with the spirit of the rules, so we hope they do!
More Wage Subsidy FAQs
Thankfully, a NZBN number is no longer a required field on the employer application form. This was an unnecessary hassle having to obtain a NZBN for partnerships.
Employee birthdates are also no longer compulsory. This saves a lot of time.
Since the $150k cap was removed, WINZ has introduced a new process for large employers to upload the employee data in a .CSV file. This is a good development, because trust me you would not want to be doing the standard form for a large number of employees.
Partnerships with working-partners qualify for the Wage Subsidy. Passive partners should not be included.
We have been using these two possible options for partnerships:
- File one application for the partnership with the working partners (and PAYE employees) as employees; or
- File working partners applications as self-employed applications.
WINZ are now saying that one partner applies as an employer and includes the other partners as employees. We suggest this is now redundant as a result of the NZBN number now being an optional field. We would recommend filing an employer application for the partnership.
We have fielded a large number of questions around share-holder employees.
Are shareholder-employees eligible?
WINZ has recently updated their FAQs to confirm that working-shareholders are eligible. Thankfully, it is consistent with the positions we have been taking.
How to file a claim for a shareholder-employee
The new WINZ guidance is that a shareholder-employee can be treated as an employee in the employer application. We have interchangeably been doing this or treating a shareholder-employee as self-employed.
What if a shareholder-employee has no shareholder- salary?
This does not matter for the Wage Subsidy. They either work in the business, or they don’t. Remember that shareholder-employees and shareholder-salaries are a tax fiction.
Note that Leave Payment applications may be different – as they have a minimum wage requirement.
Contractors are responsible for their own applications as self-employed.
The guidance at the moment is that only one Wage Subsidy form can be completed per employer. Since we cannot get hold of WINZ at the moment, the best guidance we can give is to file another application and see what happens. Sorry, but that’s the best we have.
The scenario we are seeing more often is that is the shareholder-employees who are missed. We are processing these as self-employed applications in these circumstances.
Multiple businesses in one entity
This needs to be considered on a case by case basis, but where there are two unrelated businesses in the same entity, we believe that one business suffering a 30% turnover decline is sufficient.
We ran this by WINZ shortly before things went mad after the Monday noon announcement.
We are now seeing that WINZ/MSD notifications are sporadic at best. We are getting text messages and/or emails confirming payment in a very small number of applications. Last week there seemed to be notifications for all applications when payment was made.
Processing times – Contacting WINZ
We are seeing some applications being paid out same day, and others are taking days. With the WINZ line overloaded and failing more often than not, often there is no feasible way to follow up on a claim at present. That being said, as of a few minutes ago we had a staff member get through for the first time since midday Monday.
Only passing on the subsidy amount
We are aware of certain business associations telling their members it is OK to only pay the $585.80 subsidy amounts to employees (where the employment agreement allows).
We are also aware of unions and Labour MPs sending out comms to employees to dob in the above scenario.
Remember that a condition of getting the Wage Subsidy is that you will use your best efforts to pay employees at 80% of their normal pay. If a subsidy was applied before the lockdown was announced, then it might arguably be OK to only pay the $585.80 amount for the lockdown period as you applied with the best intentions of paying 80%. If an employer has applied knowing they intend to only pay $585.80 (and that is less than 80% of normal pay), then there is a big problem!
This is still a problem. Casual employees are common in certain industries because the employer needs control over when they can work. For example, the work may be weather dependent. We suggest a practical approach, are they in effect a permanent employee, and do you intend to pay them 80% of normal for the subsidy period. The second problem is – what is normal.
Leave subsidy for locked down employees
Now we are all on “house arrest”, does everyone who can’t work from home qualify for a Leave Payment. We have no new information here, but we note that the Government has not allocated more funding, and the WINZ guidance has not changed. We suggest that this is limited to those required to self-isolate due to travel, age, or being immune-compromised. There are few other scenarios we might be comfortable claiming for.
Tax treatment FAQs
We are still seeing a lot of confusion about the tax treatments of subsidies. Social media is full of comments people are sharing about what their accountant supposedly told them that are entirely wrong.
Here is a summary of the tax positions:
As a result of a law change, there is no GST on Wage Subsidy or Leave Payments in any circumstances.
Income tax – subsidy paid to employer
The subsidy is not taxable in the hands of the employer. Also, the corresponding deduction is not available, making it tax neutral.
Income tax – subsidy paid to sole trader, shareholder-employee, partner etc
Where the amount goes directly to a person responsible for their own taxes, the amount is taxable income.
Employer paying employees
The subsidy received is independent of the amount paid to the employee. Think of it as the source of the funds. Amounts being paid out to employees are taxable as always.
Shareholder employee wage subsidy goes to the company
There are two potential options here:
- The amount is excluded income to the company and treated as drawings to the shareholder employee; or
- The amount is treated as taxable income to the company but passed out to the shareholder as part of the shareholder salary.