Covid-19 – Wages Subsidy and RBPN financial support winding down
With the end of the Wage Subsidies and the free consultant support provided through the Reginal Business Partners’ Network starting to expire there are still things you need to be doing now and things that you need to be preparing for.
In this update we cover:
- The need to check the subsidy was used correctly and the need to ensure tax and payroll items are being managed properly
- When does your funding provided by the RBPN actually run out and what you should do?
- Taking action where you suspect an employee may be under the influence of drugs
Wage Subsidy follow-up
- Did you meet all the wage subsidy eligibility criteria?
- Did you correctly pay all amounts through to your employees, and have you correctly dealt with any “unusual” employment scenarios?
- Has your accountant checked the wage subsidy been correctly treated for income tax and GST purposes?
- Have you been compliant with all other tax rules, including calculating PAYE and paying taxes on time – the Inland Revenue has announced it will be completing tax compliance reviews?
- Is your payroll showing correct balances for things like leave, particularly where there have been unusual scenarios?
Did you meet all the wage subsidy eligibility criteria?
Clearly you must be able to demonstrate that you suffered the 30 per cent or 40 per cent (depending on the scheme that was applied for) drop in revenue over a set period. But you should also be able to show what active steps you took to mitigate the impact of Covid-19 on your business’s activities (for example making insurance claims; engaging with your bank and drawing on cash reserves if appropriate).
Did you correctly pay all amounts through to your employees, and have you correctly dealt with any “unusual” employment scenarios?
No problem if all the employees named clearly received wages that were at least equal to the subsidy (or their usual 100% pay), as long as they all stayed entitled to it.
I know many of you had some unusual situations and may have had to pay back some of the subsidy. For example, situations like:
- Leavers during the Wage Subsidy period;
- Redundancies during the Wage Subsidy period;
- Employees who received ACC income assistance payments during a wage subsidy period.
- Employees who received Government-assisted parental leave during a wage subsidy period.
If you think you may have had an unusual situation and not adjusted your wage subsidy appropriately, best to take advice now rather than wait for an audit.
Has your accountant checked the wage subsidy been correctly treated for income tax and GST purposes?
Once businesses have determined the correct amount of wage subsidy they are eligible for (taking into account amounts that may be required to be repaid) the GST and income tax treatment must be considered.
A key point here is that if you received the subsidy prior to 31 March 2020, and that is your financial year end, then it needs to be apportioned across the two tax years, so don’t leave this check too long.
Have you been compliant with all other tax rules, including calculating PAYE and paying taxes on time?
A compliance audit, means broadly that the IRD will be checking that your PAYE (and other such tax obligations) related to the period you were receiving the subsidy has been paid.
Is your payroll showing correct balances for things like leave, particularly where there have been unusual scenarios?
Situations like where sick or annual leave has been used to top up the subsidy will obviously impact on the outstanding balance but, particularly where these payments are calculated manually, you should get your payroll provider to assure you the unusual items have been correctly treated.
RBPN Funding Expiry
But do not wait for them to do so. Be thinking of ways you can constructively use the funding – as long as it is in line with the purposes for which the funding was given.
If it is my services I should give you at least 2 weeks’ notice – but it’s definitely best if you contact me and tell what we can still do.
What to do if you think your employee is under the effects of drugs?
You should take action in line with your company policy and Employment Agreements – but many of them only allow testing if there has been an accident or if you have reasonable grounds for believing the individual is “under the influence”. What are reasonable grounds? More to the point if you are pushed to explain them to someone, what would you say?
It pays to have any manager, who may have to deal with this on any regular basis, attend training in this process. One way of doing this is to attend a TDDA (The Drug Detection Agency) workshop. While they do provide in-house training, they also have public workshops. And they address how to make a reasonable decision and helpful tools, as well as covering the required process.