Practical information to help you understand COVID-19 entitlements
With COVID-19 challenging communities and businesses throughout New Zealand, it is worth emphasising the importance of prioritising the care we show for each other. The information we have shared below, regarding the Wage Subsidy Scheme and Covid-19 Leave and Self-Isolation Support, is designed to support you as business leaders as you navigate through uncertainty.
On 17 March the Government announced a NZ$12.1 billion Economic Response Package. This stimulus includes two immediately accessible subsidies for employers, contractors, sole traders or the self-employed – the Wage Subsidy and Leave Payment Scheme. The Wage Subsidy is a one-off lump sum payment to support businesses in keeping people employed for the next 12 weeks. The Leave Payment Scheme provides support for employees that are required to self-isolate in accordance with Ministry of Health guidance.
The purpose of the Wage Subsidy is to support employers who have experienced a minimum 30% decline in actual or predicted revenue to keep employees on the payroll during this difficult period. The Wage Subsidy is calculated with reference to employees and spans a 12 week period. The subsidy is calculated as $585.80 per employee working more than 20 hours per week and $350.00 per employee working less than 20 hours per week, capped at a maximum of $150,000. The subsidy will be paid as a lump sum covering a 12 week period.
The purpose of the Leave Payment Scheme is to provide payments (via employers) to employees who are required to self-isolate – these payments are required to be passed on in full to the relevant employees (less employment taxes and other deductions). The leave payments are $585.80 to a person working 20 hours or more per week and $350.00 to a person working less than 20 hours per week.
How to apply for the Wage Subsidy and Leave Payment Scheme
If you are eligible for either of the schemes, we strongly encourage you to consider applying today.
If you are an employer, use this link to apply.
If you are self-employed / a contractor, use this link to apply.
Preparing an application
In order to apply you will need to confirm your eligibility and collect the required information.
Please ensure you have proof that you are registered and operating in New Zealand, and that your employees are legally working in New Zealand.
To complete the application form you will need to collect:
- Your business bank account, IRD number, New Zealand Business Number, and business contact details.
- With employee consent, relevant employees’ names, dates of birth, IRD numbers and employment types (i.e. more or less than 20 hours of work per week).
You will also need to make a declaration to the Ministry of Social Development that affirms the legitimacy of your application. You can read the full text of the declaration here for the wage subsidy, and here for the leave payment.
Wage Subsidy eligibility
Businesses applying for the Wage Subsidy will need to consider whether they can demonstrate revenue decline, proof of “active steps” and best endeavours to retain employees.
You will need to confirm a minimum revenue decline of 30% for any month between January and June 2020, compared to the same month in 2019.
- Proof can be an actual decline or forecast decline, but needs to be due to COVID-19.
- For those in business less than a year, comparison can be made to a previous month “that gives the best estimation of the revenue decline related to COVID-19”.
Proof of “active steps”
You will need to be able to prove that you are taking active steps to mitigate the financial impact of COVID-19 on your business. Active steps might include activating a business continuity plan; or seeking advice and support from bank or financial advisors, the Chamber of Commerce, a relevant industry association, or a Regional Business Partner programme.
Best endeavours to retain employees
You will need to be committed to making “best efforts” to retain employees and pay them a minimum of 80% of their normal income for the subsidised period.
Leave Payment Scheme eligibility
Businesses applying for the Leave Payment will need to declare that employees’ require self-isolation and that they will promptly pass the payment on in full (less taxes) to the employees named in the application.
Employee self-isolation status
In all cases, employees must be legally working in New Zealand, must be unable to work from home and must have been expected to work for the employer during the given period.
Employees will also need to fall into one of three groups:
- Cannot work because the person has been diagnosed with COVID-19; or
- Cannot work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19; or
- Required to self-isolate in line with Ministry of Health Guidelines; have registered as needing to self-isolate with Healthline; cannot work from home; and self-isolation is not because the employee left New Zealand since the travel restrictions on 16 March 2020 and have since returned.
Employers and employees are not required to use normal leave balances before applying for the subsidy.
For the ‘self-employed’, you will need to be able to demonstrate that:
- You are legally working in New Zealand;
- Usually earning the minimum wage when you decide to self-isolate;
- You were expecting to work for the period of self-isolation; and
- You cannot draw an income for the period of self-isolation.
Business Continuity Service
We are providing half-day diagnostic labs to clients that have been impacted by COVID-19, which can be conducted virtually, over the phone or in person (when optional).We have harnessed lessons from China, and indeed Deloitte Global, and discovered that the most impacted areas of the business are often finance, supply chain, talent and digital capability. The workshops will help clients work through our resilience leadership framework, address their most impacted areas, and produce an action plan that is executable, measurable and impactful.
These workshops will be paid for by NZTE for their Focus 700 and Foundation Build customers. For non-exporting clients, you may be eligible for a capability voucher via the Regional Business Partner network. Find out more here.
We’re here to help
The recent outbreak is likely to have serious impacts on New Zealand communities and businesses. We encourage all to take reasonable precautions and follow the advice of the Ministry of Health. It is worth noting that COVID-19 is causing a great deal of uncertainty that requires thoughtful, people-first responses. We encourage all business leaders to directly address employees’ psychological stress alongside the organisational needs.
We are ready to help now if you need support in applying for a subsidy, collecting information for an application or confirming your eligibility.
- We are able to assist in budgeting, forecasting and reviewing accounts to confirm changes in revenue expectations / outcomes.
- We are able to document conversations to show the ‘active steps’ you are taking to respond to the financial impacts of COVID-19 on your business.
- We are ready to discuss your choices for employee retention and wider business continuity plans, including strategies to maintain cash flows.
- We can support governance group decision-making through the next few weeks and months.
- We can support working-from-home finance staff or teams to stay on top of compliance obligations.
A word on tax and other issues
Our discussions with Officials to date confirm that the wage subsidy and leave payment should be treated as non-taxable income and non-deductible to the employer and also exempt from GST. Payments to employees as a result of the subsidies should be treated as normal salary and wages in the hands of the employees for tax purposes. Please reach out to your usual Deloitte advisor if you wish to discuss or may have complicating factors.
Deloitte has also considered the impacts that COVID-19 will have on a range of other business, strategic and tax issues, including: employees and human resources’ issues, working from home arrangements, digital infrastructure, supply and distribution chains (including new contracts and tax implications), tax payments, provisional tax, PAYE, GST, tax returns, allowances paid to employees and tax residency. We note also that the Economic Response Package also included measures to change the tax rules that apply to low value asset write-offs and tax depreciation on buildings. If you are considering issues in any of these areas, please reach out to your usual Deloitte advisor. We will be publishing articles and sending updates that cover these and other issues as further information and insights become available.
The content of this article is accurate as at 18 March 2020, the time of publication. This article does not constitute advice; if you wish to understand the potential implications of current events for your business or organisation, please get in touch. Alternatively, our COVID-19 webpages provide information about our services and provide contacts for relevant experts who can help you navigate this quickly evolving situation.
Robyn is a Partner within the Tax Team at Deloitte in New Zealand. This involves many things, including preparing submissions on behalf of Deloitte and developing thought leadership in the area of tax. She likes to think about how tax developments really impact on Deloitte's clients and has a particular interest in tax policy and keeping up to date with all the many tax developments.