Your application guide to Wage Scheme Subsidy grants

TaxBusiness AdvisoryNewsSpecialist TaxGovernmentPayroll

31 March 2020

To assist with your applications for the Government’s wage subsidy, which was announced in their $12.1 billion COVID-19 support package, we’ve set out some guidance and tips to help you through the process.

Much of the material provided by Government is relatively high level and omits necessary detail in areas. Further, changes to the rules are made from time to time without notice. That means it is not always possible to be conclusive as to how the rules apply. As such, the following guidance is necessarily general.

Every organisation in New Zealand that employs staff or from which a person derives their income is eligible to apply for the Wage Subsidy. This includes business trading through companies, partnerships and trust, sole traders and self-employed people, charities, incorporated societies, non-governmental organisations and post-settlement governance entities.

There are, however, eligibility criteria that need to be met.

Qualifying for a Wage claim

The key qualifying criteria are:

  • Your business must be “registered and operating in New Zealand”.

  • Your employees must be legally working and employed in New Zealand.

  • The business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to COVID-19.

  • Your business must have taken active steps to mitigate the impact of COVID-19.

  • The business must not be in receipt of a subsidy in respect of any employees named in the application.

  • You must meet the conditions in the declaration, which includes an obligation to make best efforts to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

Details required for the application

The application is available here. When you apply you will need to provide:

  • Business IRD number.

  • Business name as it appears in IR record.

  • Business address.

  • New Zealand Business Number (NZBN): if you do not have an NZBN enter “0”s.

  • Names of your employees and whether they work over or under 20 hours per week.

  • Employee IRD number and date of birth.

  • Contact details for your business.

Note: You need consent from your employees to submit their personal information to MSD. The declaration states this should be provided in writing, however, that may not be practical at this time, especially for large employers. At a minimum, employers should advise staff they are applying for the wage subsidy and that they will be disclosing the employee’s name, IRD number and date of birth to MSD and any other agency that needs to see that information for the purposes of processing your application. Staff should be invited to advise if they do not consent to this and a reasonable period allowed for a response.

Tips for completing your application

  • Make sure the person entering the data has all employee data at hand, including name, date of birth, and IRD number.

  • The application system verifies the IRD number for the employee. If an IRD number is entered incorrectly, you will not be able to submit the application. To overcome this, try to ensure the person entering the data has a means of verifying staff IRD numbers if required.

  • There is no “save” function on the application at date of writing so have all the information on hand before you begin.

  • If employee numbers are greater than 100, you can upload your employee data to a spreadsheet here.

  • Due to the volume of people accessing the site, we recommend completing your application outside of normal hours. We have heard of cases where the system has crashed and all entered data is lost. This should improve with time.

  • Please make best efforts to get your application correct. An employer cannot make two claims for the same employee. If an error is made, you will need to contact Work and Income on 0800 40 80 40.

  • Check compliance with the declaration you are agreeing to.

  • As the declaration is prone to change, print it out and keep in your records.

What is a business in this context?

Much of the guidance material is expressed to apply to a “business”. Following the Government announcement on 23 March, the clear intent of the Wage Subsidy Scheme is that it applies to all forms of business regardless of structure. However, we are often asked how this applies to businesses with multiple operations or subsidiary entities.

For example, if a business has four separate divisions and each business has its own employees, such as a department store, is there one overall business or four businesses? Does it matter if each business has its own payroll? And, if each of the four businesses is a separate company, will there be four businesses?

In this context, no definition of business is provided in the guidance material. However, the business does have to be “registered and operating in New Zealand”. This term is defined as a business that:

  • Is registered with the New Zealand Companies Office.

  • Is physically located in New Zealand.

  • Has employees that legally work in New Zealand.

In this respect, if a company is carrying on a number of businesses, whether there is one or more business will be measured by reference to the business being registered with the Companies Office. Thus, a company with four divisions will likely be one business, but if each division is in a separate subsidiary, they are likely to be regarded as separate businesses. We note that the terms “business” and “employer” are used interchangeably in Government materials.

Charities and not for profit organisations such as clubs and societies

The Wage Subsidy Scheme rules were clarified by the Government’s decision on 23 March to confirm that registered charities, non-governmental organisations, incorporated societies and post-settlement governance entities are eligible. Clubs carrying on business, such as a sports club that runs bar facilities and hires its premises for functions, will qualify also.

30% decline in revenue

A 30% decline in revenue is defined on Work and Income’s website as a business that has experienced a 30% decline in:

  • Actual revenue;

  • 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.

On the Ministry of Social Development fact sheet dated 18 March 2020, it states you need to have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to COVID-19. The business must experience this decline between January 2020 and 9 June 2020.

Demonstrating the decline in revenue

A key issue for many businesses is how they demonstrate a fall in revenue by 30%. For some businesses, their trading to date will be normal, but is starting to decline. While for others, there has been a rapid decline in revenue. It is unclear whether a claim can be made if the business ceases to exist prior to the application is made.

“Revenue” is defined on Work and Income’s website as “the total amount of money a business has earned from its normal business activities, before expenses are deducted”. The definition would appear to be focusing on gross revenue.

The application form does not require hard evidence be submitted with the application – although obviously evidence should be captured. Instead, the approach taken is a declaration-based approach that can be followed up with an audit to confirm the accuracy of the application. The declaration employers make can be found here.

The evidence that should be captured and retained would include:

  • Bank statements.

  • Information from your accounting system (for the corresponding period(s) last year) such as:

- Details of sales revenue received

- Invoicing

- Cashflow

- Management accounting information.

  • GST returns filed.

If you are running a bespoke accounting or cloud-based system this may be relatively straight forward. If you rely on less technology-based means of capturing this data, we can assist with pulling this information together for you.

New businesses of less than one year old and high-growth firms (for example start-up firms with significant revenue) are also eligible. Businesses in this situation will need to demonstrate the revenue loss against recent (or similar period) comparable figures such as comparing March and February results rather the prior year comparable figures.

Self-employed people with variable monthly incomes are eligible if they can demonstrate the revenue loss when compared 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).

Businesses that have yet to experience a 30% fall but who can predict this with certainty, should capture evidence of how that prediction is arrived at. That could include:

  • Recent sales data.

  • Loss of expected or known work or bookings.

  • Loss of contractual arrangements.

  • Correspondence from customers if the correspondence demonstrates lost income will arise, such as the cancellation of a forward booking or sales order.

Example 1:

A six-person full-time employee forestry contracting gang in Gisborne has been severely affected by the COVID-19 impact on logging exports and their revenue is down 90 per cent. Their employer applies for the targeted wage subsidy. The employer is eligible for $42,117 as a lump sum payment and is able to provide just over $7,000 gross (before tax) to each of the employees across the next 12 weeks.

Example 2

A tourism operator in Queenstown, with 20 permanent part-time employees and 40 casuals, is affected by the decrease in international visitors. Their income is down 50% from the same period last year, forward bookings over the next two months are down 30%, and the casual workforce has already been released. The employer is eligible for $84,000 as a lump sum and uses the subsidy to keep paying all part-time staff their existing (current) income over the next 12 weeks.

Example 3

A horticulture business employs two permanent employees, one part-time employee and two casual staff. The business also pays its shareholder employee a salary with no PAYE deducted. At the time of application, it had all staff continuing with their duties. However, its biggest customer, a local food wholesaler, advises its sales have fallen well off and the wholesaler’s orders fall by 70%. The employer has faced this decline for a week now and can predict sales for the remainder of March 2020 based on recent sales. The employer applies for $33,660. For these purposes, casual staff are regarded as part-time employees if they work less than 20 hours a week. Additionally, the employer has treated the non-PAYE shareholder employee as a full-time employee for this purpose as that person’s income is also affected.

Example 4

A cinema used to have a steady stream of customers during the day that averaged 175 to 200 cinema goers. Following government announcements on public gatherings, cinema attendance has fallen to the point the business owner calculates it will cost more for the business to open its doors than leave them closed. The business engaged four part-time staff and two casuals. The business applies for $25,200 to defray staff costs and remain open.

Types of employment or contractual engagements for your staff

The wage subsidy applies to permanent full-time and part-time staff, as well as casual staff that you employ. These are staff for which you will be withholding tax through the normal PAYE processes. So, even if someone is not paid regularly, such as a share fisherman, if they are in receipt of a wage for which PAYE is deducted, they will be regarded as an employee. Shareholder employees with PAYE deducted are also counted as an employee.

Non-PAYE shareholder employees that are actively engaged in the business also qualify. Having an employment agreement in place with the shareholder employee concerned would assist verifying the employment relationship but is not determinative. If a shareholder salary is declared in the shareholder’s tax return, and a deduction taken in the employing company return, this should provide ample evidence of the employment and the shareholder should be included in the application as an employee (subject to full time / part time rules).

Often a business will not remunerate a shareholder employee by way of salary or drawings. We are frequently asked if a claim is available for these people. In these circumstances, if a business has not been remunerating the shareholder employee, it is difficult to see a case to make a wage claim.

Partners actively engaged in a partnership business also qualify. That is, the partnership is eligible to make a wage claim in respect of partners that take drawings and allocate partnership profits at year end. Salaried partners are likely to be employees and treated as such for these purposes.

For a partnership, one partner applies on behalf of all partners using the “employer” form treating all partners as employees in the application. Note, partnerships may not have a NZ Business Number. While you can apply for one, we understand you can enter zeros in that field.

Subsidies received for non-PAYE shareholder employees and partners should be used to cover the means for which that person is remunerated. That is, if the person normally takes drawings, the subsidy will assist funding drawings, and tax implications will flow through the provisional tax system in the usual manner. You can find more on that here.

If you have people on your payroll in receipt of withholding payments, such as farm or horticulture contractors, these people should be treated as self-employed contractors and apply in their own capacity.

If someone contracts to you through a company, they will be a business in that capacity and not an employee. A business may have staff that are also self-employed in another capacity - for example a company employs an accountant part time, who also has her own tax agency business and files tax returns on behalf of her own clients. In that case, the business claims as an employer with the part time accountant as an employee, and that employee may be able to claim for their business activity in their other capacity as a self-employed person or a company with a shareholder employee.

Example 5

A two-shareholder company runs a service station and workshop. Both shareholders are shareholder employees and take drawings during the year and allocate a non-PAYE shareholder salary at year end. The company’s workshop business is now only servicing essential businesses and workshop turnover is down 90%. The workshop turnover represents 40% of the company’s profits. As profit is down by more than 30% the company files the “employer” application and treats both shareholder employees as employees for this purpose. Provisional tax is paid on the subsidy hands of the shareholders.

Example 6

A three-partner engineering firm has experienced a more than 30% decline in revenue due to recent events relating to COVID-19. While the partners can work from home and complet existing work to keep the firm going, new work has dried up in March by 80%. After consulting their accountant and reviewing the position with their bank, the evidence points to a revenue drop in excess of 30%. The firm decides to lodge an application for the wage subsidy. The senior partner lodges the application in the partnership name with her other partners as employees along with the firm’s other staff.

Further assistance is available on the work and income website.

Full time or part time?

The difference between full time and part time (in this context casual staff working less than 20 hours per week will be part time) is whether the employee works 20 hours or more each week. With the subsidy at $585.80 per week for a full-time employee and $350.00 per week for a part-time employee, it is worth checking payroll records to determine whether staff at the 20-hour margin are under or over the 20-hour threshold.

For example, some permanent part-time employees may have hours that fluctuate under and over the 20-hour threshold. If you have staff in this situation the advice on the Work and Income website is to average the employee’s hours over the last year. If this average is 20 hours or more the employer can apply for the full-time rate, and if it’s under 20 hours they can apply for the part-time rate.

Example 7

From the wage records for our cinema business in Example 4, the business owner calculates the following:


Hours worked February 2019 to February 2020

Average per week


If the employee has worked for less than a year, the employer should average the hours worked during their total employment period.

Wage scheme subsidy cap

A cap of $150, 000 (or 21 full-time employees) applied to the Wage Subsidy when originally introduced, however, the cap was removed on 23 March.

When the cap was in place, employers were only required to make the application for 21 full-time staff or equivalent. Arguably, they were also only required to use best endeavours to retain those named employees in employment on at least 80 percent of their regular income for the period of the subsidy.

With the cap removed, employers are not obliged to apply for the wage subsidy for all staff. The requirement to use best endeavours to retain employees and pay them a minimum of 80% of their normal income for the subsidised period will still only apply to those employees for which a subsidy is sought. That is, employees named on the application.

In relation to removing the cap, Work and Income advise:

  • If an employer has already applied for and been granted the wage subsidy for its employees, and MSD has capped the amount paid, you don’t need to do anything because they will top up the difference.

  • If you have applied for the wage subsidy for your staff, and claimed only enough to meet the cap, (that is, only claimed for 21 staff) once you have used this subsidy, you can reapply.

Employees on leave or ACC

Employees on paid leave should be included in the employee numbers.

It is not clear if employees on parental leave (or on leave without pay) and not expected to return to work within the 12-week period, qualify as an employee for the number of employees count. At a high level, if the employer is not paying the employee, or they are not due back within the 12-week period, it is hard to see a case to claim for their costs.

For employees on ACC, assuming the criteria are met, the employee is an employee at the time the application is lodged and, as the rules are written, could be included in the employee count.

However, the Government has made it clear the Wage Subsidy Scheme is a high-trust scheme and, as such, employers should consider the objectives of the scheme and what it is trying to achieve before including employees on ACC in the application.

A part-time employee claim may be merited if the employer is topping up the shortfall from ACC payments to the employee’s normal income.

What if my business was already affected by the Southland floods?

Many businesses in Southland, especially in the Te Anau and Milford areas were hit by the weather storm in February 2020 and have enquired about eligibility. Our position is that a business hit by the floods alone will not qualify for the COVID-19 wage subsidy. However, many of these businesses will now be impacted by COVID-19 and will be eligible for the wage subsidy.

Employer subsidy (pooled approach)

The Wage Subsidy Scheme is the employer’s subsidy. However, confusion arose as to whether:

  • The subsidy was tagged to an employee such that it was available for the employer to fund only that employee’s wages, or;

  • The employer could pool the subsidy and use an excess for some employees to fund wages of other employees.

A statement and change to the employer declaration issued by Government on 27 March, stated the Government expected a tagged approach where the wage subsidy for each employee is expected to be passed onto that employee. This gave rise to anomalous outcomes for employees whose normal income was less than the subsidy.

The position of 27 March was overturned on 28 March. The Minister of Finance stated, “But to be absolutely clear if a person’s income is normally less than the subsidy they can be paid their normal salary.

“This is particularly an issue for part time employees some of whom normally earn less than the $350 per week. We urge employers to use normal hours in the period before COVID-19 to assess the amount to be paid.”

This statement confirms the wage subsidy is designed to keep employees connected to their employer and employers should take a pooled approach to managing the wage subsidy. Any difference can be used for the wages of other affected staff; however, the subsidy must be used to fund wages. It is not a subsidy to fund losses and the employer must use their best endeavours to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.

Example 8 (from Example 2 above)

Example 2 above was provided prior to the 27 March announcement. That example reads:

A tourism operator in Queenstown, with 20 permanent part-time employees and 40 casuals, is affected by the decrease in international visitors. Their income is down 50% from the same period last year, forward bookings over the next two months are down 30%, and the casual workforce has already been released. The employer is eligible for $84,000 as a lump sum and uses the subsidy to keep paying all part-time staff their existing (current) income over the next 12 weeks. To achieve this, the employer can use excess funding it received for casuals to fund their normal income and to fund the wage costs of its part-time staff.

It’s important to remember the declaration requires employers to declare, “You will only use the subsidy for the purposes of meeting your named employees’ ordinary wages and salary and your obligations in relation to this subsidy.”

While the pooling approach allows flexibility to meet all employee wage costs and assists with the 80% rule, your business should be careful not to apply for more funding than is necessary to meet payroll costs. This could potentially occur in businesses that employ a lot of casual staff.

As the Government is at pains to state, the scheme is a high-trust scheme. In this context, employers should consider whether funding received for all casual staff will overfund their wage costs and put them in breach of the declaration or, at the least, the spirit of the subsidy, if an application were made for all casual staff.

Example 9

A horticulture operation employs three permanent part-time staff and ten casual staff, five that work seven hours a week, and five that work fourteen hours a week. This is a weekly wage cost of $3,300. However, if the subsidy is applied for all staff, the subsidy at $350 per employee is $54,600, which is $4,550 for a week. As this exceeds 100% of normal payroll costs, the employer should consider whether this excess is necessary to fund 12 weeks of wage costs.

Wage subsidy declaration

When applying for the subsidy employers are required to tick the box on the application form that says, “I confirm that I have read and understood and agree to this declaration.”

Our advice is to work through the declaration and make any necessary file notes on compliance to which you can refer should a question arise. In our experience the on-line declarations do change, and as such it would merit printing out the declaration you are agreeing to on the date of filing the application.

Ensuring the wage subsidy gets to the employees

The employer subsidy takes a pooled approach, which gives flexibility to employers to use the subsidy to fund wages of staff as it sees fit to best meet its obligations under the wage subsidy. However, employers have an obligation under the declaration to ensure the subsidy does fund wages or is on paid to staff at the subsidy amount. Among other things, under the declaration an employer is accepting an obligation to:

  • Retain the employees named in your application as your employees for the period you receive the subsidy in respect of those employees.

  • Only use the subsidy for the purposes of meeting your named employees’ ordinary wages and salary and your obligations in relation to this subsidy.

  • Remain responsible for paying your employees’ ordinary wages and salary for the employees named in your application.

  • You will for the period you receive the subsidy:

- use your best endeavours to pay at least 80 per cent of each named employee’s ordinary wages or salary; and

- pay at least the full amount of the subsidy to the employee; but

- where the ordinary wages or salary of an employee named in your application was lawfully below the amount of the subsidy before the impact of COVID-19, pay the employee that amount.

Collectively, these obligations ensure the subsidy makes it way to the employees that formed the basis of the application. The Government expects businesses that access the wage subsidy to undertake best endeavours to pay employees 80% of their normal income. If that is not possible, for reasons such as the business has to cease trading, employees must be kept on the payroll and paid the subsidy amount, or actual income if that is lower than the subsidy. The obligations also ensure that staff made redundant will continue to receive the subsidy.

Example 10

A Central Otago fruit grower employed two permanent staff and six casuals. The wage subsidy was received after New Zealand moved to Level Four of its four-level Covid-19 alert system, and the business decided to close as it was becoming too difficult to manage staff and MPI requirements. Staff were made redundant. Consistent with the declaration obligations, the business has agreed to pay 100% of earnings for the next four weeks. After that, they will pay the subsidy amount to full-time staff at $585.80 per week, and normal wages to the casual staff until the subsidy is exhausted.

“Best endeavours”

Employers are required to declare that, for the period the subsidy is received, they will use “best endeavours” to pay at least 80 per cent of each named employee’s “ordinary wages or salary”.

“Best endeavours” is not defined in the rules but is often found in contractual arrangements. Guidance on the meaning can be gleaned from decisions of the United Kingdom Courts. The term is generally synonymous with a prudent, determined and reasonable person taking steps to achieve a desired result. However, “best endeavours” should not require a party to take steps that would bring about its bankruptcy or liquidation, or to continue in a course of action which would lead to business failure. The term also needs to be balanced against Director’s duties under the Companies Act.

Measuring 80% of normal income

The declaration defines the “ordinary wages or salary” of an employee are as specified in the employee’s employment agreement as at 26 March 2020.

However, statements from Government, such as the Minister of Finance’s statement on 28 March refer to a person’s normal income, normal salary or normal wage, or ordinary wages and salaries interchangeably.

The rules are ambiguous in this context. As a guide, we suggest for employees where it’s difficult to know what their weekly earnings are (that is with fluctuating hours, overtime, bonuses or commissions), the 52-week average would be a fair indication of normal income. For someone on a salary, the same calculation that is used for leave would give a good representation of normal income, that is higher of 52-week average or ordinary income under contractual terms.

Income tax and GST issues

Under current law the wage subsidy is treated as excluded income in the hands of the employer, but the wage cost (for wages subsidised) is not deductible. For GST, a law change has confirmed the subsidy is not subject to GST

As the wage subsidy is a subsidy to an employer, there is no PAYE obligations (or any other obligation such as KiwiSaver, Student loan and ACC) arising on the subsidy when it is used to fund wages. Instead payroll should continue in the normal manner.

Qualifying for a Leave Payment

From 17 March 2020 the COVID-19 Leave Payment was made available to support people financially if:

  • They need to self-isolate.

  • Cannot work because they are sick with COVID-19.

  • Cannot work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19.

The Leave Payment was to be available for eight weeks from 17 March 2020, however, this subsidy scheme was withdrawn from 4pm Friday 27 March. We have been advised that applications filed before that time are to be processed. See more here.

You can read our earlier article for further information on this.

Further assistance

The Findex team are ready to answer specific or more detailed questions. We are also available to assist or make the application on your behalf. Get in touch with us today.

Findex has developed a Government Stimulus Health Checkand free Business Wellbeing Toolkit to help businesses manage potential risks and take full advantage of eligible stimulus assistance. Book your Health Check here.


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March 2020

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Author: Craig Macalister

Craig is a Taxation Advisory Partner at Findex in Invercargill. He has unrivalled experience in this role. Craig joined Findex in 2012 as a Tax Principal heading up the Findex South Tax team. In this role Craig provides the firm and it’s client’s with advice on all aspects of GST, income tax and fringe benefit tax. He joined Findex following his role as Tax Director with the New Zealand Institute of Chartered Accountants. This role primarily involved leading the Institute’s direction and input on tax policy and overseeing the Institute’s Tax Advisory Group.