The introduction and subsequent further changes to the wage subsidy provided by the Government has bought up a lot of questions for many, including the correct tax treatment of these. We list below some links that you may find helpful, as well as some information forwarded to us by the Inland Revenue.
Common Questions - WINZ
Your Questions Answered - IRD
The IRD has also given the below advice to tax agents:
Inland Revenue would strongly encourage employers to pass the wage subsidy amount (which is for a 12-week period) to the employee as per their normal pay cycle.
For example: If the employee is normally paid weekly, the intention of the wage subsidy scheme is that the employee receives 1/12th of the wage subsidy lump sum each week for 12 weeks as part of their weekly pay, in addition to any potential top up from the employer each week.
Some employers may choose to share the wage subsidy as a 12-week lump sum straight away to their employees. This has significant potential to have downstream tax and social policy implications for an employee.
What are the tax consequences for employees?
• Paying the 12-week subsidy to an employee as a lump sum brings up to 12 weeks of income, that would normally be earned in the next tax year, into this tax year (which ends on 31 March 2020).
• The additional income could move them into a higher marginal tax bracket and result in them receiving a tax bill when Inland Revenue completes the automatic assessment process later this year;
• If, as a result of receiving the additional income, their total gross income for the year exceeds $48,000 they will no longer qualify for the Independent Earner Tax Credit;
• It may also impact their Working for Families Tax Credits, Child Support, Paid Parental Leave entitlements or they may receive a Student Loan bill
As this is an evolving situation, the above information is subject to change.