I have seen so much misunderstanding about wage subsidy and resurgence support payments on social media. So just want to take moment to clarify some of the more common misunderstandings that I am seeing.
* The following reflects my understanding at the time of writing. You must contact IRD and/or MSD for accurate and up-to-date information.
1) First do your sales analysis for six weeks. Find your typical income for a week (not your highest and exclude non-typical income). For wage subsidy compare a typical two weeks of continuous income from the six week period prior to lockdown. This is your default comparator period.
2) Wage Subsidy is only open for two weeks from Friday 20th to Thursday 3rd for the first two weeks of wage subsidy. So make sure you get your application in on time or you may miss out.
3) The next round of wage subsidy will open up as lockdown is extended. This needs to be applied for separately. Your previous application does not continue – unless MSD advise otherwise when the lockdown extension is formally announced.
4) Sole Traders and Companies can apply for both the wage subsidy and resurgence support payment.
Wage Subsidy
Apply if you expect your business income to reduce by 40% or more over the first 2 weeks of lock-down. Use your default comparator period data as discussed above. This does not include passive income.
Full Time = more than 20 hours
Part Time = less than 20 hours
Full/Part Time Includes all Sole Traders, Shareholder (who actively works in the company – not passive shareholding) Employees, including casual workers.
You need to get agreement (ideally in writing) from employees to share their information with MSD. MSD have the terms on their website. https://www.workandincome.govt.nz/online-services/covid-19/declaration-wage-subsidy.html
For workers with different work hours each week, find the average over the last 12 months or similar.
Pay employees and shareholder/s normal salary/wage or average work pattern from 12 months average.
If staff earn less than wage subsidy received, pay only their normal or average wage. Use the remainder to top up the shortfall on higher paid staff.
If there is an overall unused balance this will need to be returned to MSD.
If you have some sales coming in, keep a weekly analysis of sales to ensure you met the 40% decline in income criteria.
If paying staff Monday to Friday of the first week. The first two days is normal work. The remaining 3 days is wage subsidy. In your payroll system set this up as a separate pay item.
Note – no GST on Wage Subsidy
Paying employees when receiving wage subsidy. If you can pay 100% of wages great, if not then you give your “best endeavour” to pay 80%.
All changes to pay must be done in accordance with employment law and with written mutual agreement between employer and employee for temporary or permanent contract variations.
Wage Subsidy payments are taking quite a while to be processed especially it seems for sole traders and no-employee/shareholder only companies.
MSD will advise you if your application is declined.
Resurgence Support Payment
To qualify you must have a reduction of income by at least 30% (or decline in capital raising if a pre-revenue business)
RSP is to support business running costs
Apply though your MyIrd with Inland Revenue
This is a one off payment for the length of lockdown until we get to level 1
NOTE – this payment is GST inclusive if you are GST registered
This does not need to be passed to employees
Use base rate of $1500 or 4 x your weekly income whichever is lower
$400 per full time equivalent employee (working more than 20 hours) including shareholder employee. Up to 50 full time equivalent employees
Part time employment (less than 20 hours) is rated at .6 and IRD will round the final point allocation up to the nearest whole number.
I.e. two full time employees and one part-time = rated at 2.6. IRD will round this up to 3 and pay $1200 plus base rate of $1500
This money can not be taken out of the company as drawings, it must be used for paying company expenses.
If you have two or more companies, apply for each separately.
Check out more information and apply to IRD here https://www.ird.govt.nz/covid-19/business-and-organisations/resurgence-support-payment
Now available for businesses who have been trading for 1 month or more.
I highly recommend that business owners and especially Auckland and Northland business do a six week cash flow forecast and budget to ensure that they are well prepared for an extended lock-down.
Free 15 min consultation. If you would like any help at all or simply want to talk things through please do not hesitate to contact us. https://calendly.com/epiphanyaccounting/15min
Disclaimer.
Epiphany Accounting Solutions Ltd and its employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Contact MSD and/or IRD for accurate information regarding Wage Subsidy and Resurgence Support.
This information reflects the writers understanding at the time of writing. This is not to be considered accurate, reliable or up-to-date. The reader is fully responsible for doing their own due diligence before making a claim with IRD and/or MSD and/or providing/preparing financial records to support their claims with IRD and/or MSD.