Wednesday, 25 March 2020

Minimum wage is going up

Minimum wage is going up  Effective 1 April 2020   
  • The minimum wage  is  set to increase  on  1 April from $17.70 to $18.90  per hour.   
  • Training  wages will also  increase to $15.12  to keep the rate at  80% of minimum wage.  
What do you need to do?
  •  If you have any employees on the current minimum wage, or training wage, you will need to update their rate to the new minimum amount before 1 April.  

Tuesday, 24 March 2020

Covid-19 and Payday Filing

The IRD have advised that it is important for employers to continue to file their payday filing information. Below is the information they have provided:

Filing Employment Information:

We know it’s challenging for you in the current environment to continue to file Employment Information each payday.

However, filing Employment Information ensures information about employees is up to date and accurate and will also help support any application for the Government’s recently announced wage subsidy (if required) given the current context of COVID-19.

This information will also assist as the end of the tax year is closing – and IR will be
identifying refunds (in particular) which can be sent to customers to assist during this
difficult time

GST and Income Tax on Government Covid-19 Subsidies

When you receive a wage subsidy payment from the Government, the coding in Xero will be as follows:

  • The income (amount received) is coded as sundry or other income (with NO GST)
  • The wages payments to staff are done through the payroll as normal wages with PAYE etc and coded accordingly.
Please clearly identify that the income is from the subsidy. Because when we prepare your annual financial statements we will record the wages subsidy income as "non assessable income" so this subsidy is not included in taxable income. We will prepare be the necessary reconciliation and work-paper to support this in your tax return.

Disclaimer: This information has been prepared based on the current information available and is subject to change. 

Lockdown Help - Covid-19 Q&A

Now that we are going into lock-down the EMA have responded to a couple of questions:

Q – Are we still obliged to pay at least 80% of people's income given our business has been forced to close?
A – No, but be prepared to justify this if/when you get audited.

Q – Are we within our rights to say to staff “sorry we can’t afford to pay you during this time but we will apply for the wage subsidy which we will pass onto you”, and you can elect to top this up with your leave entitlements
A – Yes, but you must communicate this to staff and get their approval to use their leave

Further to this last question, some information received from the Bookkeepers Association suggests that employers should put in writing & get each employee to sign a document outlining the following:
• Their information will be shared with Work & Income as part of the wage subsidy application (this is a requirement of the scheme)
• Agree to reducing to 80% of their normal wages for term of close down
• Agree that the subsidy be applied to wages & they agree to top up the wages from annual leave up to 80%
• If required ask that they agree to allowing employer to put leave balances into negative & in the event of leaving after this, that this be recovered from any final pay

Tax Specialists Q&A replies from IRD
Q: The wage subsidy and leave payments are exempt from tax but are the wages still deductible and are they subject to PAYE.
A: The wage subsidy and leave payments are excluded income but only to the extent they offset wages. PAYE is applicable to the wages. This is the tax law as it currently stands.

Q: Are payments to employees subject to PAYE?
A: Yes they are. The easiest thing is to pay the employee as normal with PAYE code the total as wages. Credit the receipt of the subsidies to the wages code.

Q: If self-employed receive a leave payment will that be taxable as there are no wage deductions to offset it against?
A: Yes

Q. Are the wage subsidy/leave payments or payments to self-employed subject to GST?
A: No.

Disclaimer: This information has been carefully prepared, but it has been written in general terms only. 
The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.

Government Economic Package - Full details

The Government announced an Economic Response Package. This stimulus includes a subsidy for employers, contractors, sole traders or the self-employed ie 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. 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.

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.

Revenue information

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:
  1. Cannot work because the person has been diagnosed with COVID-19; or
  2. Cannot work because they are caring for dependents who are required to self-isolate or who are sick with COVID-19; or
  3. 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.

 We’re here to help

The recent outbreak is having a serious impact on NZ communities and businesses. We encourage you all to take reasonable precautions and follow the advice of the Ministry of Health. 

COVID-19 is causing a great deal of uncertainty that requires thoughtful, people-first responses. Business owners will need to directly address employees’ psychological stress alongside the organisational needs.

We are ready to help 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.

Disclaimer: This information has been carefully prepared, but it has been written in general terms only. 
The publication should not be relied upon to provide specific information without also obtaining appropriate professional advice after detailed examination of your particular situation.