IRD have clarified the below treatment for GST and Income Tax purposes:
- The wage subsidy or leave payment scheme will not be subject to GST. It will be treated as exempt.
- The wage subsidy paid to employers is not taxable. It is excluded income under Section CX 47 of the Income Tax Act.
- Likewise, no deduction is available when the employer pays it as wages to employees.
- It is however, taxable to the employee as it is considered part of their normal wages and is subject to PAYE, Student Loan, KiwiSaver deductions etc.
- The leave payment for self-isolation paid to employees or self-employed persons is subject to tax as it is paid to replace taxable income.
On Tuesday, 24 March, the Government confirmed a mortgage holiday for those affected by coronavirus.
The key facts of the announcement were:
- The scheme would run for 6 months
- It would include a principal and interest payment holiday for mortgage holders and SME customers whose incomes have been affected by the economic disruption from Covid-19
- The Government concern is that there are 67,000 jobs on the line and this method was intended to protect people from losing their homes as a result of the virus.
- Major trading banks are still to provide details.
BUSINESS LOANS SCHEME (Business Finance Guarantee Scheme)
Again on Tuesday, 24 March, the Government indicated a new arrangement with the major trading banks, where the Reserve Bank reduced the core funding ratios from 75% to 50%, which assists Banks to make credit available.
Key points to note are;
- This scheme will include a limit of $500,000 per loan and will apply to firms with a turnover of between $250,000 and $80 million per annum.
- The loan will be for a period of 3 years.
- The Government expects the banks to provide this facility at competitive and transparent rates.
- The Government will share 80% of the risk, with the remaining 20% being carried by the banks.
- It is important that the government has made the discretion between solvent businesses at this point, so if your business was insolvent, you may well struggle to get the loan
- The banks will have absolute discretion as to who get the loans and not the Government.