Tax Specialsts Auckland
Chartered Accountants

Publications

COVID 19 – MAKING SENSE OF IT ALL

With recent alert levels and corresponding lock down being introduced employers and staff are faced with the million-dollar question: What now? If you are unable to trade under current lockdown restrictions or you are required to self- isolate there are some options available for you or your staff. Summary of these is provided below.

COVID 19 -RESURGENCE SUPPORT PAYMENT (RSP)

Purpose:          
to provide support to viable businesses if the business is facing reduction in income due to an increase in alert levels from Level 1 to 2 or Level 3. This Scheme will be activated if the alert level last for 7 days or more.  RSP is not guaranteed it has to be activated. It is possible that the Government could decide to activate the RSP multiple times if there are multiple alert level increases from level 1. Eligible businesses will be able to apply for RSP each time it is activated as long as eligible criteria are met.

Status:            
Activated – the last day for application is 22 March 2021.

Payment:        
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 drop experienced by the business

Eligibility:        
A business 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. This decrease in revenue or capital-raising ability is compared with a typical 7-day revenue period in the 6 weeks prior to the increase to alert level 1.

  • Businesses (including sole traders) must have been in business for at least 6 months.
  • The business must be considered viable and ongoing.
  • Businesses with common ownership (commonly owned groups) must apply
  • as one group and the revenue drop test is measured across the group as a whole. If the group meets the revenue drop test and the other eligibility criteria, it would be entitled to a single payment based on the number of employees in the whole group (up to a maximum of 50 full-time equivalent employees).
  • Charities and not-for-profit organisations may be entitled to the RSP, provided they meet the other eligibility requirements.
  • Income that is received passively – such as interest and dividends, and all forms of residential and commercial rent – is excluded from the measurement of revenue.

Other:             
Other Covid 19 Government support payments do not affect eligibility for RSP.

Income Tax:     
RSP is exempt from Income Tax, expenses funded by RSP are also non-deductible.

GST:                
GST registered businesses receiving RSP will have to return GST and will be able to claim GST input tax credit on expenses funded by RSP.

Restriction:     
There are no specific restrictions other than that RSP must be used to cover business expenses such as wages and fixed costs (rent, insurance, power, etc)

How to apply:  
Applications will be made through My IR as RSP is administered by IRD.

COVID 19 – SHORT TERM ABSENCE PAYMENT (STAP)

Purpose:          
STAP is available for businesses, including self-employed people, to help pay their workers who cannot work from home while they wait at home for a COVID-19 test result. This would cover essential workers & their required absences while waiting for test results.

Payment:        
This is a one-off payment of $350 for each eligible worker. Business can apply only once for each eligible worker in a 30 days period, unless multiple COVID test are requested by the health officials or the doctor.

Eligibility:        
Businesses including self-employed people can apply for the STAP if they’ve been advised that their worker, or a self-employed person, is:

  • Required to stay home while waiting for their COVID-19 test result, or are;
  • the parent or caregiver of a dependant who is staying home while waiting for their COVID-19 test results, in accordance with public health guidance, and the dependant needs support to do so safely, or are;
  • a household member or secondary contact (as described in public health guidance) of someone who is a close contact of a person with COVID-19, and the worker has been advised to stay at home while waiting for the close contact’s test results.

Paying Staff     
Where the employee has an entitlement to be paid as per their employment agreement or the law (eg by taking paid sick leave) the subsidy must be used to pay the employee their entitlement under the Holidays Act or their contractual entitlement while they are waiting for the relevant test result.

Where the employee wouldn’t otherwise have an entitlement to be paid if they are not able to work (eg if a worker has used up their paid sick leave so would be on unpaid leave) businesses:

  • should try to pay the worker as if they had worked that day, or
  • where this is not possible, at least the full amount of the STAP must be paid to the employee while they are waiting for the relevant test.
  • If the employee’s usual wages are less than or equal to the STAP, the worker must be paid their usual wages. Any difference should be used to help pay any other affected staff.

Income Tax      
STAP must be passed onto employees and subject to the usual PAYE/Kiwisaver deductions.

  • If passed in full, the payment is “excluded income” for the employer/business without corresponding deduction.
  • If not passed on in full any excess amounts will be taxable income to the employer/business.
  • If case of self-employed, STAP will be taxable and must be returned in IR3.

GST:                
STAP is not subject to GST as its purpose is to cover wages.

How to apply: 
Applications can be made following the link below.

https://workandincome.govt.nz/covid-19/short-term-absence-payment/how-to-apply.html

COVID 19 – LEAVE SUPPORT SCHEME (LSS)

Purpose:           To help pay workers who can’t work from home who have Covid 19 or have been told by Ministry or Health Professionals to self-isolate for 14 days. This includes caregivers.

Eligibility          The majority of New Zealand employers and self-employed people are eligible to apply. Provided that they have eligible employees.

Eligible

Employees      
Are employees or self-employed persons who either:

  • are sick with COVID-19 and must self-isolate until a doctor tells them they can leave isolation
  • are identified as someone who has been in close contact with someone who has COVID-19 and have been told to self-isolate
  • are the parent or caregiver of a dependant who has been told to self-isolate
  • have been directed to self-isolate, or are the parent or caregiver of a dependant who has been directed to self-isolate, by a Medical Officer of Health in accordance with the Health Act 1956
  • are considered ‘higher risk’ if they contract COVID-19 and a doctor has told them to self-isolate while there’s active community transmission, or
  • have household members who are considered ‘higher risk’ if they contract COVID-19 and a doctor has told them to self-isolate, to reduce the risk of transmitting the virus to vulnerable household members.

Payment:        
The LSS is paid as a 2-week lump sum per eligible employee as follows:

  • $585.80 a week for full-time workers working 20 hours or more a week
  • $350 a week for part-time workers working less than 20 hours a week.

Paying Staff     
The employer must pay their employees any amount required by the employment agreement and employment legislation. The LSS requirements do not remove or reduce this obligation.

The employer must try to pay the employee their normal wages, or at least 80% of their usual pay. If that isn’t possible, the employer must pay at least the LSS payment rate (ie, full-time or part-time).

If employer can’t pay its employees their usual wages, then any reduction requires good faith consultation and written agreement in line with existing employment law.

If the employee’s usual wages are less than the Leave Support Scheme, the employer must pay them their usual wages. Any difference should be used for the wages of other affected staff – the LSS is designed to keep employees employed.

Income Tax      
For businesses the LSS is classified as “excluded income” there is also no deductions available for the wages covered by the LSS. Payments to employees are subject to ordinary deductions (PAYE, Student Loan, KiwiSaver, Child Support etc)
LSS received by self-employed people will be subject to income tax.

GST:                
LSS is not subject to GST

How to apply: 
Applications can be made following the link below.

https://workandincome.govt.nz/covid-19/leave-support-scheme/how-to-apply.html

NEW WAGE SUBSIDY (is coming)

Details of new wage subsidy will be released shortly.  We will inform you of its details once this becomes available.

IN SUMMARY:   What is the best option for me?

The option chosen will depend on your circumstances and whether the payment is for short term or longer term absence. Very brief summary is provided below:

  • Short Term Absence Payment (STAP)
    • Short term absences – where unable to work remotely whilst waiting for Covid 19 test results
    • Payment: $ 350 one off per each eligible worker
  • Leave Support Scheme (LSS)
    • Longer term absences, requirement
    • Sick with COVID 19, required to self isolate for 14 days or a caregiver.
    • Payment
  • $585.80 a week for full-time workers working 20 hours or more a week
  • $350 a week for part-time workers working less than 20 hours a week.
  • Resurgence Support Payment  (RSP)  for eligible businesses
    • Can be applied in addition to other COVID 19 benefits
    • Payment: 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 drop experienced by the business

Keep in mind

You’ll be asked to declare you meet the criteria and agree to the obligations for the use of this payment. All payments will be subject to audits and reviews.

If you have any questions please do not hesitate to ask any of us.

Your team at Roberts & Associates Ltd

Phone 09/966-1370

Email:  [email protected]