As we step into our second week of level 4 lockdown, some more information has come to light relating to eligibility requirements in applying for the Resurgence Support Payment and Covid-19 Wage Subsidy. We’ve jotted down the absolute ‘need to knows’ if you’re looking to apply for either, as well as the support you’ll need to have on hand if Inland Revenue come knocking seeking more information.
The Resurgence Support Payment or known as the ‘RSP’, is payment that helps support business that are facing a loss in revenue as a direct result of Covid-19 alert level increases (from level 2 or higher.) Businesses must show at least a 30% drop in revenue, or capital raising activity over a 7-day period. If eligible, businesses can receive the lesser of:
· $1,500 plus $400 per every fulltime employee OR;
· 4 times the actual revenue drop your business has experienced
Wage Subsidy
The Wage Subsidy is a payment to support business’ pay their employees at the movement to Alert level 3 or 4. Businesses must show at least a 40% decline in revenue over a 14-day period. If eligible, your business can claim a two-week wage subsidy of $600 per week per fulltime employee, and $359 per week per part time employee.
Good news – If you meet eligibility requirements for the RSP and the Wage Subsidy, you can claim BOTH support payments.
Note: if NZ remains in alert level 3 or 4 for more than 3 weeks, your business may be eligible to claim another fortnightly wage subsidy.
What are the differences between the two support payments?
RSP: The RSP is to be used to cover your businesses expenses, (ie: fixed costs), but not wages. The RSP does have GST, so don’t forget to ensure 15% GST is selected when reconciling on Xero.
Wage Subsidy: The Wage subsidy is used to cover a portion of wages to employees. Unlike the RSP the Wage Subsidy does not have GST. If you’re a veteran to the Wage Subsidy, reconcile this straight to the ‘Wage Subsidy Income’ account on Xero.
Remember, if your business is eligible to receive the Wage Subsidy, you must make your best effort to pay employees named in your application at least 80% of their usual wages. If this isn’t possible, you need to pay them at least the subsidy.
*Xero Tip –If you’re new to the Wage Subsidy and RSP you will need to create a new account code on Xero to reconcile the RSP and Wage Subsidy payments. Check out our quick demo video below on how to create a new account code in your Xero chart of accounts.
Eligibility and revenue drop test RSP:
– Your business must have experienced a decrease in revenue of at least 30% in the last 7 days.
– The comparison period is to be a typical 7-day period in the 6 weeks prior to the alert level increase i.e.: any week between 6 July – 16 of August.
– The start of the affected period is the date the increase in alert level started (unless this lasts more than 7 days).
– Your business must have been viable and ongoing before the change in alert levels.
– Your business must have been present and operating in NZ for at least 6 months.
For more of the nitty gritty eligibility criteria click here.
Eligibility and revenue drop test Wage Subsidy:
Unlike the first round of the Covid-19 Wage Subsidy, businesses must meet more specific criteria to be eligible for the subsidy:
– Your business must have experienced a decrease in revenue of at least 40% over a 14-day period.
– The comparison period is atypical 14-day period in the 6 weeks prior to the alert level increase ie: any week between 6 July – 16 of August.
– Your employees must provide written consent to being included in the WSS application. Please get in touch with us if you need a template for acquiring written consent from your employees.
– Active steps must have been made to mitigate the impacts of Covid-19 on the business (further details on what this means below).
Click here to hear the eligibility criteria straight from the horses mouth.
How to calculate whether you satisfy the drop in revenue test:
We’ve prepared a short clip demonstrating how to calculate whether your business satisfies the 30% and 40% revenue drop tests mentioned above:
Active steps in mitigating the impact of Covid-19:
“Your business must have taken active steps to mitigate the financial impact of COVID-19.”
Although all Wage Subsidy’s have required businesses to take steps to mitigate the impact of Covid-19 before applying for the wage subsidy, this time round MSD have been slightly clearer (although still undefined) on what these steps might entail:
1. Getting in contact with your bank ie: drawing on cash reserves where reasonable, and requesting loans be made interest only for a period of time.
2. Making Insurance claims if your business has Business Interruption Insurance.
3. Complete a cash flow forecast based on the date of the application. This should provide a model of a range of scenarios (especially if the business were to use their own cash reserves), so if Inland Revenue come knocking, you have shown the forecasted effect of your business cashflow without receiving the subsidy.
Where to apply:
RSP:
If you meet the above criteria applications for the RSP should be submitted through the IRD website here
Wage Subsidy:
If you meet all of the above criteria, applications for the wage subsidy can be submitted through the Work and Income website here.
What you will need to have on file:
– Your workings for the revenue decline test.
– Written consent from your employees.
– Confirm all staff information, including whether they are considered part time (less than 20 hours a week) or full time (20 hours per week or more) is correct. It might be good to crosscheck this information with IRD.
– Documentation of the steps taken to mitigate the impact of Covid-19 on your business. I.e.: email correspondence from your bank, insurer or accountant.
As always, we’re here to help you get through the thick of it (and the rest), so if you’re stuck on anything mentioned above, please get in touch with your Outside go-to, or anyone from the team that tickles your fancy.
At Outside Accounting, we understand that staying compliant with tax obligations can be complex, especially with recent Inland Revenue initiatives targeting various sectors and financial activities. From hidden economy audits to cryptocurrency monitoring, the tax landscape is evolving, and businesses must stay ahead to avoid penalties and ensure smooth operations.
Hiring a reliable tradesperson may seem straightforward, but finding the right fit takes careful planning. You want to ensure you’re confident in your decision, and the tradesperson feels capable of meeting your expectations. Effective research and clear communication are crucial for making this happen.
In today’s fast-paced business environment, making the right decisions is critical for achieving sustained growth and success. At Outside Accounting, we’ve seen firsthand how businesses can thrive when they avoid common pitfalls. Here are three major business mistakes and actionable tips to help you stay on the right path:
Evaluating a franchise opportunity requires careful analysis of various factors to ensure long-term success. Here are 11 essential points to consider before purchasing a franchise:
Steering a small business through economic downturns can be challenging, but these moments also present opportunities for growth, innovation, and strategic change. Deciding whether to pivot, grow, or leave the business depends on factors such as market conditions, financial stability, and personal aspirations. Here’s a guide to help you navigate tough times:
As a business owner, reviewing your financial reports each month is essential for maintaining control and steering your business in the right direction. Here are six key reasons why you should prioritize this important task.
