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.

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