COVID-19, Q&A wage and leave subsidy payments
March 25th, 2020
IRD has released the Government’s Covid-19 wage and leave subsidy payments. As a result many of you have been asking questions.
These Q&As should be on the IRD’s website next week, at which time we will forward you all the link.
IRD will be adding to the Q&As over time.
Q.1 Is the wage subsidy payment subject to GST?
A.1 No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)
Q.2 Is the wage subsidy paid to the employer taxable?
A.2 No- It is excluded income (Section CX 47 ITA).
Q.3 Is the wage subsidy deductible when paid by employer as part of wages to employee?
A.3 No – it is not deductible
Q.4 Is the wage subsidy taxable to employee?
A.4 Yes – As it is included as part of their normal wages it is subject to the usual PAYE, Student Loan, Kiwisaver deductions, etc. The helpline said yes, but the facts/info online don't say anything in terms of tax/PAYE etc. It just says that the $585.80 'must be passed onto employees in full'. Do I process it through the payroll?
Note:- As the wage subsidy is a subsidy to the employer to help them fund an employee’s wages it is included as part of the employees normal wages and all deductions of PAYE, Kiwisaver,
Student Loans, etc are made as normal. If the employees are paid the same wages as previously their pay and deductions on their payslip should be the same.
Q.5 Is the leave payment for self-isolation subject to GST?
A.5 No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)
Q.6 Is the leave payment for self-isolation paid to employees or self-employed persons subject to tax?
A.6 Yes – It is paid to replace taxable income so is subject to tax.
Q.7 Is there a limit to top up the payment? The helpline had no idea, and I can't find anything about it in the facts/info online either. E.g. an employee may normally receive $1000.00 gross each week...so are they able to use annual leave to top up the $585.80 so they're receiving close to their normal weekly wage?
A.7 As MSD are making the payment this enquiry should be made to them, however whether you top it up with cash payments or annual leave is probably between you and your employee. Although to qualify for the subsidy the MSD information states the employer must make the best efforts to pay an employee a minimum of 80% of their normal income for the subsidised period.
Q.8 If the person is a NZ based employee but overseas and is having to self-isolate and cannot work, can the employer access the support for this type of employee?
A.8 This is also an enquiry for MSD. Note however that the information on their website states that to be eligible, the employee was legally working for their employer at the time they decide to self-isolate, and they were expected to work for the period of self-isolation.
If you have questions that haven’t been addressed above, please forward them through to me.
Chris Lynch, CA
Chris is the founding Director of Lynch & Associates Limited.
He qualified as a CA in 1973 and is a full member of the College of NZICA now merged with CAANZ. His expertise is in the areas of tax, accounting, business development, forecasting, and auditing. He has a clear focus on adding value to his clients lives and businesses and seeing the people behind the numbers.
Chris experience includes working as a CFO and company secretary for some of New Zealand’s leading companies before starting his own CA firm in 1999. In his previous roles Chris has worked in the wool, dairy, engineering FCG, banking and investment banking and stock broking industries.
Today he uses this vast experience to assist his clients add value to their businesses and personal lives.