If you’re struggling to make sense of the different Covid-19 business support schemes we have summarised the key areas here including what’s available, how to apply & how to treat these receipts for GST and tax purposes. If you are processing your own transactions in your accounting software, we strongly recommend setting up a separate code for each type of Covid-19 support payment received.
Wage Subsidy Scheme (WSS)
https://www.workandincome.govt.nz/covid-19/index.html
- Unlike the first lockdown in March 2020, the wage subsidy must now be applied for in two-week “blocks”. Application for the second block opened on Friday 3 September.
- Your business must have suffered at least a 40% decline in revenue over 14 days between 31 August and 13 September 2021 in comparison to a typical 14 days in the six weeks prior to the move to alert level 4 on 17 August.
- Each subsidy block covers a two week period at the rate of:
- $600 pw for each full-time employee (20 hours a week or more)
- $359 pw for each part-time employee (less than 20 hours a week).
- Wage subsidies paid to employers are not subject to income tax, however the wage payments to employees from the subsidy are not deductible.
- If you are self employed however the subsidy will form part of your income for the year.
- There is no GST payable on wage subsidies received.
Applications for the wage subsidies can be made through at the following link:
- https://www.workandincome.govt.nz/covid-19/wage-subsidy/how-to-apply.html
- Information required when you apply:
- business IRD number
- IR customer name (this is the name that’s linked to your IRD number in myIR)
- New Zealand Business Number (NZBN)if you have one
- business address
- your contact name, email address and mobile number
- bank account number
- employee details (full-time and part-time:
- names
- dates of birth
- IRD numbers
- whether full-time (more than 20 hours pw) or part-time.
Resurgence Support Payment (RSP)
https://www.ird.govt.nz/covid-19/business-and-organisations/resurgence-support-payment
- The Resurgence Support Payment (RSP) is administered by Inland Revenue to help with any business costs (including wages that are not covered by the wage subsidies). A business can receive both the RSP and wage subsidies at the same time..
- A business or organisation must have experienced at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period due to the increased COVID-19 alert level.
- Eligible businesses and organisations can apply to receive the lesser of:
- $1,500 plus $400 per full-time equivalent (FTE) employee, up to a maximum of 50 FTEs
- Four times (4x) the actual revenue decline experienced by the applicant.
- GST is payable on the RSP if the applicant is GST-registered
- From an accounting perspective it is important to record the RSP separate from other subsidies received.
Update #1:
- Businesses now need to have only been operating for at least one month prior to 17 August (previously six months).
- For applicable businesses this change is active from 8am on 9 September.
Update #2:
- A second round of the resurgence payment was announced on 10th September 2021
- Businesses will need to show a 30% or more drop in revenue in a 7-day period from 8 September until immediately before all of NZ returns to Alert Level 1, compared to a typical 7-day period in the 6 weeks before 17 August
- The payment will stay as $1,500 plus $400 per full-time equivalent (FTE) employee up to a maximum of 50 FTEs, or four times the actual revenue decline experienced by the applicant, whichever is less.
- Businesses and organisations will be able to apply for the second payment even if they have received the first payment.
- Applications will open for the second payment at 8am Friday, 17 September
- Applications for both payments will remain open until 1 month after the whole of New Zealand returns to Alert Level 1.
Applications for the RSP can be made via myIR by the business owner or their tax agent.
Leave Support Scheme (LSS)
https://www.workandincome.govt.nz/covid-19/leave-support-scheme/index.html
The Leave Support Scheme is available for employers, including self-employed people, to help pay their employees who need to self-isolate and can’t work from home.
- This means your workers:
- can’t come into work because they are in one of the affected groups and have been told to self-isolate, and
- can’t work from home.
- The LSS is paid at the same rates as the wage subsidy, with the same tax treatment.
Applications can be made at:
https://www.workandincome.govt.nz/covid-19/leave-support-scheme/how-to-apply.html
- The information you will need available is the same as the wage subsidy above.
Short Term Absence Payment (STAP)
https://www.workandincome.govt.nz/covid-19/short-term-absence-payment
The Short-Term Absence Payment is available to help businesses keep paying eligible employees who:
- cannot work from home, and
- need to miss work to stay home while waiting for a COVID-19 test result (in line with public health guidance).
There’s a one-off payment of $359 for each eligible employee in any 30-day period unless a health official or doctor tells the employee to get another test. It’s also available to self-employed people. The GST and income tax obligations are the same as for the WSS & LSS schemes.
Applications can be made at:
https://www.workandincome.govt.nz/covid-19/short-term-absence-payment/how-to-apply.html#null
- The information you will need available is the same as the wage subsidy above.
Small Business Cash flow scheme (SBCS)
https://www.ird.govt.nz/covid-19/business-and-organisations/sbcs
The Small Business Cashflow Scheme (SBCS) was introduced to support small to medium businesses and organisations struggling with a loss of actual revenue due to COVID-19.
- Applications are open until 31 December 2023.
- The loan amount is $10,000 per firm, plus $1,800 per FTE.
- Loans are for a maximum term of 5 years and are subject to an interest rate of 3% pa from the date the loan is made available to you.
- During the loan period, the following rules apply.
- If you fully repay the loan within 2 years, no interest is charged.
- If you do not fully repay the loan within 2 years, interest is charged for the entire term of the loan.
- Repayments are not compulsory in the first 24 months, but voluntary payments can still be made at any time.
- After 24 months regular payments of both principal and interest are required.
- GST does not apply to any receipts related to the SBCS.
- Interest paid on the loan is tax-deductible.
Applications for the SBCS can be made via MYIR by yourself or your tax agent.
For more information on any of the above support schemes contact us today.