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With more businesses returning to work as lockdown restrictions are eased, questions around the use of the 12-week wage subsidy are arising. One question we’d like to focus on here is around contractors who received the Wage Subsidy in a lump sum payment but who have since been able to return to work at Alert Level 3.

If this is you, you may be wondering how to apply the lump sum subsidy you have already received. In this case, you can use the Wage Subsidy to offset your income loss over any period, provided that loss was incurred as a result of COVID-19.

If you have returned to work within the 12-week period, there does not have to be a decrease in revenue over each of the 12 weeks; there only has to be a decrease in revenue over one month from January 2020 to June 2020, and this loss has to be due to COVID-19.

For example:

Josh is a contractor. Due to the Alert Level 4 lockdown, all his work dried up and he experienced a 30% decrease in revenue. He received the 12-week Wage Subsidy in a lump sum payment.

On Tuesday he returned to work, and his calendar for the month is looking rather full after a month of no work. He expects that his income will be slightly less than normal. Josh can use the Wage Subsidy to top up his income loss during these weeks where his income is slightly less than normal and any left over can be used to top up his income loss during the weeks when he wasn’t working at all.

It is also important to note, Work and Income New Zealand outline a number of scenarios when the funds need to be repaid. Specifically, you need to repay some or all the COVID-19 Wage Subsidy if: you no longer meet the criteria for the subsidy. At present, there isn’t specific guidance, as to how ‘no longer meeting the criteria’ is assessed which creates uncertainty for all.

As a matter of practical advice, if you have returned to work as a contractor and you’re receiving close to your pre-Covid-19 income, then you may want to put aside the balance of any wage subsidy, if or when you are audited.

If you have any questions around the wage subsidy, our offices are open and we’re here to help.

Business & Commercial Financing