30 August 2021
Following New Zealand’s move to Alert Level 4 on 17 August 2021, the Government has announced further support measures for businesses and employees affected by COVID-19.
The COVID-19 Wage Subsidy August 2021 (CWS) is a payment to businesses or organisations anywhere in New Zealand to contribute towards the wages of their employees for a two-week period. One would assume this would be extended if the lockdown is extended. The payment is also available to those that are self-employed and not-for-profit organisations.
The wage subsidy rates have been increased to reflect the increase in wage costs since the scheme was first introduced in March 2020. Businesses will now be eligible for $600 per week for full-time employees and $359 per week for part-time employees. A full-time employee is one who works 20 hours or more per week. As a result, the CWS will result in businesses receiving a one-off payment of $1,200 for each full-time employee and $718 for each part time employee.
Businesses must pass on the full wage subsidy to their employees. However, if the wage subsidy is more than an employee’s usual pay the employee can continue to be paid at their normal rate.
To be eligible for the CWS an applicant must:
- Operate a business in New Zealand that employs and pays the employees named in their application;
- Have had, or is predicting to have, a decline in revenue of at least 40% over the period 17 August to 30 August 2021 (inclusive) when compared to a typical 14-day consecutive period of revenue in the six weeks immediately prior to the move to Alert Level 4 on 17 August 2021 (the default comparator period); or
- If you have highly seasonal revenue, have had, or are predicting to have, a decline in revenue of at least 40% over the period 17 August to 30 August 2021 (inclusive) when compared to the same 14 consecutive days in 2020 or 2019. In addition, you must be able to demonstrate that the seasonal nature of your business makes it harder to meet the 40% revenue decline test using the default comparator period than if your business was not of a seasonal nature;
- When calculating the decline in revenue any income received from a COVID-19 related scheme is to be ignored;
- The decline in revenue must be attributable to the effects of the move to Alert Level 4 on 17 August 2021;
- Have taken active steps to mitigate the impact of the move to Alert Level 4 on 17 August 2021 on your business activities;
- Retain the named employees for the period you receive the CWS on their behalf;
- Use the CWS to pay the ordinary wages and salaries of the named employees for the period in which you receive the CWS;
- For the period you receive the CWS you must use your best endeavours to pay at least 80% of the ordinary wages or salary of each named employee;
- Pay at least the full amount of the CWS to each named employee, but where the ordinary wages or salary of a named employee as at 16 August 2021 was below the amount of the CWS you are entitled to pay the employee that lower amount;
- Repay any amount of the CWS that cannot be used to pay the named employees or to support paying and retaining other affected staff;
- Discuss your application for the CWS with each named employee, gain their consent to make the application (in writing if possible), and advise them that they can request access to the information you have provided under the Privacy Act;
- Consent to the Ministry of Social Development publishing information about your business and the level and duration of the CWS provided to you;
- Notify the Ministry of Social Development of any changes to your eligibility to receive the CWS within 5 working days of the change(s);
- Agree to repay the CWS or any part of the CWS if you fail to meet any of the obligations about how to use to the subsidy, were not or stop being eligible for the CWS (including where you predict that you will meet the revenue decline test but as a result of your actual revenue you do not), or receive insurance for any costs covered by the CWS;
- Prepare and retain records and evidence to support your declaration.
Applications for the CWS are open from 9am on Friday 20 August 2021 and businesses have up to two weeks to apply. You can apply for the CWS here.
We strongly recommend that businesses print off the declaration are carefully read the criteria they are agreeing to. It would be advisable to document how you satisfy each of the criteria in case your application is ever reviewed by the Ministry of Social Development.
We also recommend that businesses bank the CWS proceeds into a separate bank account and then pay their employees from this bank account. This will provide proof that the funds have been passed on to employees.
Businesses can receive both the CWS and the Resurgence Support Payment (RSP) at the same time. However, they cannot get the CWS for an employee for any period where the employee is covered by the Leave Support Scheme (LSS) or the Short-Term Absence Payment (STAP).
The LSS is a two-week lump sum payment for employees that must self-isolate and cannot work from home. The rates are currently set at $585.80 per week for full-time employees or $350 per week for part-time employees.
The STAP is a one-off (once per 30 days) payment of $350 for employees that must miss work due to a COVID-19 test and cannot work from home.
The RSP is a payment to assist viable and ongoing businesses with their expenses such as wages and fixed costs. It is not a loan so does not need to be repaid. The RSP is also available to sole traders, charities, and not-for-profit organisations provided they meet the eligibility criteria.
The amount of the RSP is dependent on the number of full-time equivalent employees (FTEs) a business has and its level of revenue. As with the CWS, employees working 20 hours or more per week are considered to be full time.
The RSP is calculated as the lower of:
- $1,500 plus $400 per FTE, up to a maximum of 50 FTEs. The maximum payment is $21,500 (for a business with 50 FTEs). Sole traders can receive a payment of up to $1,900; or
- Four times (4x) the actual revenue decline experienced by the business.
For example, if a business with four FTEs experienced a revenue decrease of $700, they would be entitled to the lesser of $3,100 (being $1,500 + (4 x $400)) or $2,800 (being $700 x 4). Accordingly, the business would be eligible to receive a RSP of $2,800.
To be eligible for the RSP a business must:
- Have experienced a decrease in revenue, or a decline in capital-raising ability, of at least 30% over a seven-day period when compared to a typical seven-day period in the six weeks prior to the move to Alert Level 4 on 17 August 2021. Seasonal businesses should show a 30% decrease in revenue compared with a similar week the previous year;
- Have suffered the decrease in revenue or decline in capital raising ability due to the change in COVID-19 alert levels (not just due COVID-19 in general);
- Have been in business for at least six months prior to the change in COVID-19 alert levels;
- Be considered viable and ongoing;
- Be physically present in New Zealand;
- Have a New Zealand Business Number.
When calculating the decline in revenue, passive income (such as interest, dividends, residential rent, and commercial rent) is to be excluded from the measurement of revenue.
Applications for the RSP due to the current increase to Alert Level 4 will be open from 8am on Tuesday 24 August 2021. Applications will remain open for one month after a nationwide return to Alert Level 1.
Businesses can apply for both the CWS and the RSP provided they meet all the eligibility criteria.
Another scheme available to support small and medium sized businesses is the Small Business Cashflow Scheme (SBCS). Further information on the SBCS can be found here.
If you are having trouble paying any of your taxes please get in touch with your adviser. We can discuss options available to you such as using tax pooling or tax finance to satisfy your tax liabilities. For example, using the services of Tax Management New Zealand allows businesses to make tax payments after their due date but at a much lower interest cost than what Inland Revenue charges and without incurring late payment penalties.
Inland Revenue is also able to assist where businesses have been impacted by COVID-19. They have the discretion to remit use of money interest and late payment penalties where a taxpayer’s ability to make a payment on time has been adversely affected by an outbreak of COVID-19. This applies to situations where a taxpayer is physically unable to make a payment on time (for example, because they have been quarantined) or where a taxpayer lacks the financial means to make a payment on time because of the economic impacts of COVID-19.
Inland Revenue can also assist businesses with setting up an instalment arrangement to pay their outstanding tax liabilities. There is even an option to apply for a write-off due to serious hardship in extreme cases. If you are unable to make a tax payment Inland Revenue recommends that you contact them as soon as possible to discuss the options available to you.
If you require assistance assessing your business’ eligibility or applying for any of the support payments, please contact your adviser or get in touch with the Findex team.