There is so much happening on COVID-19 it can be hard to find the right information. Inland Revenue NZ has provided FAQs about the tax treatment of Govt subsidies.
The receipt of the subsidy is not income to the employer & you don’t need to return GST;
any payments to employees are treated as normal payroll payments which are subject to PAYE, Kiwi Saver, student loans, child support, ACC)
The Wage Subsidy
Q Is the wage subsidy payment subject to GST?
A No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act) Q Is the wage subsidy paid to the employer taxable? A No- It is excluded income (Section CX 47 ITA).
Q Is the wage subsidy deductible when paid by employer as part of wages to employee?
A No – it is not deductible
Q Is the wage subsidy taxable to employee?
A Yes – As it is included as part of their normal wages it is subject to the usual PAYE, Student Loan, Kiwi saver deductions, etc.
The Leave Payment Scheme
Q Is the leave payment for self-isolation subject to GST?
A No – An Order in Council is being drafted to treat it as exempt (Section 5(6E)(B)(iii GST Act)
Q Is the leave payment for self-isolation paid to employees or self-employed persons subject to tax?
A Yes – It is paid to replace taxable income so is subject to tax
Filing Employment Information
The IR have acknowledged how challenging it is 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 any further 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
Please keep an eye on our website, Instagram, LinkedIn and Facebook as we will keep these updated with relevant information.
The Team at PKF Goldsmith Fox