August 2020

Wage subsidy... take three

The government has announced a third iteration of the wage subsidy in light of the Level 3 restrictions currently applying to Auckland.

Key elements of this 3^rd version of the wage subsidy are:

• A business must suffer a 40% actual or predicted decline in revenue for at least 14 consecutive days between 12 August and 14 September compared with the same period last year.
• The wage subsidy will be available to all businesses in New Zealand, not just those in Auckland.
• Applications should be open by the end of this week.
• The wage subsidy will cover a period of two weeks.

HOWEVER -  Before you submit a claim for this 2-week subsidy, check out your entitlement to claims

IF you haven't previously been entitled to, or claimed, the second 8-week subsidy, which was available from 10 June, please check your income figures (before 1 September) as this second lockdown may have pushed your August revenue down over 30 days, rather than just this 14 days? The government has emphasised the second wage subsidy is still available until 1 September to those businesses who have not yet utilised it.

Key elements of the 2nd extended wage subsidy are revisited here:

• A business must suffer a 40% actual decline in revenue in the 30 consecutive days immediately prior to applying for the new wage subsidy, compared to last year.
• Applications will close on 1 September.
• The wage subsidy will cover a period of eight weeks.
• This is a tighter threshold (than the first subsidy), both in terms of percentage (40% versus 30%), as well as needing to prove a decline in revenue (previously you only needed to project a decline in revenue).
• You don't need to have applied for the first subsidy to be eligible for the 2^nd.
• You can't receive more than one Covid19 payment for the same employee at the same time.
  

Comment

As with the earlier two wage subsidies, this is welcome for businesses who want to do good for their employees but are struggling as a result of the re-imposition of the current level 3 restrictions.

We expect that while initially the wage subsidy will be handled in a high trust model, the Ministry of Social Development is likely to commence audit activity once Auckland is back to normal business conditions. Please ensure you have documentation as proof of your eligibility.

Some clients have been in touch with queries regarding changes in circumstances since the first lockdown, eg, full-time - part-time.  Claim on the basis of your current situation, and for current staff only, and be prepared to answer to MSD queries if they review the current subsidy applications to previous terms.

Remember that self-employed can claim the subsidies as well as employers, and the subsidy will be returned as income in your 2021 individual income tax return.

If you have any queries in relation to this latest version of the wage subsidy, or want your figures reviewed to provide independent verification that the required 40% decline in revenue has occurred or will occur, please contact us as soon as possible.

This year has been turbulent so far and with so much uncertainty in business prospects currently, many clients are needing our help to deal with cash-flow crises.  An unprecedented number have entered instalment arrangements with IRD to spread their tax payments. 

DIane is currently reviewing 2021 provisional tax obligations, with the first provisional instalment due at the end of this month, which in most cases needs to be reduced from the level IRD are currently expecting.  The threshold for Prov tax has now been raised to $5,000, some of you may not now be required to pay your tax in advance. Terminal tax is payable in the April following year-end.

Our workflow has been more volatile than we'd normally experience, and therefore longer delays in our normal time frames to complete annual returns, so we ask for your understanding and patience please while we balance the demands to best assist our clients.   



stay safe!   Diane   21 August 2020