Applying for the 8 Week Wage Subsidy Extension
The Government has announced an 8 week extension available from 10 June to 1 September 2020. Eligible employers will need to apply or reapply through Work and Income for the Wage Subsidy Extension.
You can’t apply for the Wage Subsidy Extension for an employee until their 12 week Wage Subsidy has finished.
Your organisation must have experienced a minimum 40% decline in revenue for a continuous 30 day period. This period needs to be in the 40 days before you apply (but no earlier than 10 May 2020) and must be compared to the closest period last year. The decline must also be related to COVID-19.
Revenue means the total amount of money an organisation has earned from its normal activities, before expenses are deducted.
*Note also that the first wage subsidy was a 30% decline, and the wage subsidy extension was originally announced as 50%.
What’s the criteria to get the wage subsidy
Ask yourself – “Does my charity, NGO or incorporated society expect to have a 40% decrease in revenue between 10 June and 1 September?
If so, you can probably apply for the wage subsidy. Check the criteria to confirm.
How much is the wage subsidy?
The subsidy is $585.50 per week for a full time employee (20 hours or more per week) and $350 per week for a part time employee (under 20 hours per week).
If the employee is working less than 20 hours per week at the time of application but would have been 20 hours or more due to the impact of COVID-19, you can apply for the full time rate. There are some additional guidance if the employee’s hours normally fluctuate under and over 20 hours per week.
Some key tax points for charities, incorporated societies and not-for-profits:
- The Wage Subsidy is not subject to GST
- The subsidy is subject to PAYE and other payroll obligations such as ACC as normal when paid to an employee
- For an employee, the payment is “taxable remuneration” and subject to PAYE, ACC levies, KiwiSaver contributions and student loan repayments at the date of payment
- The employee must remain employed during the period of the Wage Subsidy
- The employer must make their best efforts to pay the employee their normal wages (or at least 80%) and no less than the Wage Subsidy (if this is less than the normal wages)
- Employees who normally earn less than the Wage Subsidy paid to the employer are not required to be paid the full subsidy, however the excess is to be used to support other employees whose wages are greater than their subsidy
- Employees’ KiwiSaver contributions may be suspended where they are receiving the Wage Subsidy by requesting a “savings suspension” from Inland Revenue. The requirements for a savings suspension are:
- The employee must have been a contributing member for one year or more (unless they can show evidence of financial hardship)
- The savings suspension is for a minimum three months (unless the employer agrees)
- The savings suspension can be for up to one year, but can be ended early, or an extension applied for.
If the employer does not qualify (either at the beginning of receiving the subsidy or later), they are required to repay the subsidy to the extent of the disqualification. An example might be where the income level did not drop as expected (100% repayable) or the employee left the business (repay the weeks the employee did not receive the subsidy).
This page was last updated on 23 June 2020.