Coombe Smith Blog

Wrap up: all you need to know about the Government's COVID-19 wage subsidy scheme

This commentary applies to wage subsidies made under scheme after 4pm on 27 March 2020.

Wage subsidies are available for businesses significantly impacted by COVID-19.

The subsidy is for 12 weeks. It is:

·   $585.80 per week for a full-time employee (20 hrs or more)

·   $350.00 per week for a part-time employee (less than 20 hrs).

The payment is made as a lump sum to the employer - $7,029.60 for a full-time employee and $4,200 for a part-time employee.

Sole traders and the self-employed are an "employee" for the purposes of this subsidy.


The wages subsidy is available for businesses that have experienced a 30% decline in revenue (actual or predicted) that is related to COVID-19 for any four weeks between January and 9 June 2020 compared to the year before.

To qualify for the subsidy, the business must:

·   be physically located in New Zealand

·   if the employers is a company, it must be registered with the NZ Companies Office

·   have employees that are legally working in New Zealand

·   have taken active steps to mitigate the impact of COVID-19 before making the application (including but not limited to engaging with your bank, drawing on your cash reserves as appropriate and making an insurance claim);

·   retain the employees for the period of the subsidy.

The subsidy applies to the following businesses:

·   sole traders

·   self-employed persons

·   companies

·   registered charities

·   non-government organisations

·   incorporated societies

·   post-settlement governance entities.

Decline in revenue

The business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared to the same month last year. (For new businesses that have been operating less than a year, a reasonably equivalent month). The revenue loss must be attributable to the COVID-19 outbreak.

"Revenue" means the total amount of money a business has earned from its normal business activities, before expenses are deducted.

Retain the employees for the period of the subsidy

Employers must agree that, for the duration of the subsidy, they will make best efforts to retain those employees for which the subsidy is paid. Employers must also:

·   Make best endeavours to pay staff at least 80% of their usual wages; if that isn't possible, to pay at least the rate of the subsidy that applies to that employee. This applies even if all business activity has ceased.

·   However, if the employee's usual wages are lower than the rate of the subsidy, continue paying that lower amount for the duration of the subsidy.

Employee consent

Businesses must discuss with their employees and gain their consent (in writing, if applicable) to sharing their personal information with the Ministry of Social Development. Details required to be shared will include:

·   name

·   date of birth

·   IRD number

·   employment type (whether they are full-time or part-time).

Details required on the application form

Businesses must supply:

·   the business IRD number and New Zealand Business Number (NZBN) if applicable

·   business name, address and contact details

·   name

·   address

·   employee details for those in the application (name, date of birth, IRD numbers, whether full or part-time).

Business interruption insurance

 You must repay the subsidy (in whole or part) if you receive business interruption insurance for any costs covered by the subsidy.

Employees with fluctuating hours

Businesses with employees on fluctuating or variable hours should use an average to work out whether to apply for the full-time or part-time rate. For example, a business could use the average hours worked each week:

·   over the last 12 months, or

·   if employed for less than 12 months, over the period of time you the employee has been with the business.

COVID-19 wage subsidy: tax consequences

The Government's 12-week wage subsidy (available for both employees and the self-employed) is paid in one lump sum to the employer.

The tax treatment for the employer is as follows:

·         the lump sum is excluded income

·         no GST applies to the lump sum receipt

·         when the payment is passed on to employees (either in one lump sum or spaced out so that it is paid as part of the employee's usual wage payment cycle) no deduction can be claimed

·         PAYE must be deducted.

The tax treatment for the employee is as follows:

·         the payment is taxable remuneration and subject to PAYE, ACC levies, KiwiSaver contributions and student loan repayments at the date of payment.

·         the payment is also a taxable receipt for the self-employed, shareholder-employees, partners in a partnership and sole traders (all of whom are treated as the employee for the purposes of the wage subsidy).

If the wage subsidy is being paid in one lump sum (or other than according to the employee's usual pay cycle) this should be discussed with the employee, as adverse tax consequences could result. For example, if the payment was made in one lump sum before 1 April 2020, this could push the employee into a higher tax bracket and/or could affect their eligibility to receive family tax credits and other entitlements.


Income Tax Act 2007, ss CX 47, DF 1.
Goods and Services Tax Act ss 5(6D), 5(6E), 89

Goods and Services Tax (Grants and Subsidies) Amendment Order 2020

Tax treatment : Commentary:

Those that receive a wage subsidy will receive a lump sum which represents a number of weeks before and after balance date. We recommend coding the wage subsidy received to a separate Sundry Income code (No GST).

Thinking through the mechanics of this and how it effects your tax position.

For March Balance dates when preparing your annual accounts we will need to either:

a) Ensure the wage expense is reduced by the amount of wage subsidy that applies for the period up until balance date, by an amount that represents the number of pay periods and number of employees of wage subsidy received. That is; if there has been one pay period for five employees, a total of $2,929 ($585.80 x 5) would need to be recognised as a reduction of the wage expense.


b) Show the amount of wage subsidy received for the period as sundry income. A total of $2,929 ($585.80).

In both cases the balance of the wage subsidy actually received not yet used to offset employee costs shall be recorded as income in advance as a liability on the Balance Sheet/Statement of Financial Position. This liability will be extinguished in the 2021 year as the period of wage subsidy is used up.

We believe the option of showing the wage subsidy received for the period as sundry income is much easier and will not distort total wage expenditure for management and comparative purposes. The correct tax position is also calculated.

Employment law obligations

Employers receiving the wage subsidy are subject to the following:

·   any changes to an employment agreement (including to rates of pay, hours of work and leave entitlement) cannot be made without the written agreement of the relevant employee

·   employers can pay the wage subsidy to their employees according to their usual pay cycles, or at other intervals as agreed with the employee

·   employees cannot be compelled or required to use their leave entitlements for the period that they receive the wage subsidy

·   employers must retain the employees named in the application for the period that the subsidy is received

·   the subsidy can only be used for the purposes of meeting the named employees ordinary wages and salary

·   employers remain responsible for paying their employees ordinary wages and salary

·       The ordinary wages or salary of an employee are as specified in the employee's employment agreement as at 26 March 2020. (For employees who have left the business as a result of the business being adversely affected by COVID-19, but have been subsequently re-employed on or after 17 March, the wages or salary are as those as at the date that the employment relationship ended).

Note that the previous sick leave scheme has been merged into the wage subsidy scheme to prevent double-dipping. Originally designed when few people were in self-isolation, it is no longer fit for purpose. The Government is working on arrangements for those in essential work requiring sick leave due to COVID-19.

For more information see:



Government Covid 19 Package

Below we have compiled up-to-date information from the New Zealand Government, Ministry of Health and MBIE

New Zealand's business support package

Yesterday the Government announced its business support package, noting it is one of the largest packages in the world on a per capita basis.

The $12.1 billion package includes:

  • Initial $500 million boost for health
  • $5.1 billion in wage subsidies for affected businesses in all sectors and regions, available from today. Businesses need to show a 30 percent decline in revenue for any month between January and June 2020 and applications can be made here.
  • $126 million in COVID-19 leave and self-isolation support
  • $2.8 billion income support package for our most vulnerable
  • $100 million redeployment package
  • $2.8 billion in business tax changes to free up cash flow
  • $600 million initial aviation support package

For more detail on the business support package and Government factsheets, see here.

Staying well informed
Keeping reliably informed, understanding the symptoms of COVID-19, staying up to date with developments and making sure your business is as prepared as possible will help you make better decisions.

MBIE has collated some great resources for businesses here that we recommend reading through and bookmarking. This includes everything from health and travel guidance, to how to create a business continuity plan.

Taking care of wellbeing
We know that there's a growing need for mental health support in small businesses, and times of uncertainty can be particularly challenging. If you want talk about any issue you are currently experiencing, do pick up the phone. We are happy to chat.

Hamish & the Team at Coombe Smith (PN) Limited.


New Trust Law

New Trust Law!


There is a new trust law for New Zealand which was enacted late July 2019.  This is the Trusts Act 2019 which takes effect from January 2021. This leaves a short 18 month window before the changes apply.


New rules for managing information.


The legislation is designed to make trust law more accessible and easier to understand. This is to ensure beneficiaries can enforce the trusts in which they have an interest.  Trustees will have obligations to:

  • Hold core documents
  • Provide certain information to beneficiaries
  • Respond to beneficiary requests for information


The legislation makes trustee duties and responsibilities very transparent.  If beneficiaries are better informed, trustees will be more accountable.  Trustees will need to be on top of their game - particularly professional trustees who are held to a higher standard of care.


New skill sets required


Managing expectations will be an important part of the trustee's role going forward.  For example,  managing expectations between:

  • Co-trustees,
  •  Trustees and beneficiaries
  • Trustees and trust creators (settlors)
  • Trustees and their advisers


The Trust will no longer be a secret.  To discharge my duties as a professional trustee I have given some consideration to preparing an advisory letter (refer below to a draft template) to beneficiaries to front foot questions and queries that will cover a number of the new requirements but also that the Trusts purpose is to first look after the primary beneficiaries which is almost always the settlors.


As a senior member of the New Zealand Trustees Association (NZTA member 1006) I shall continue to take a lead to help you as a co-trustee to discharge your duties as Trustee in the appropriate manner. We shall discuss this further at our next annual trustee meeting.



Template letter Example:



XX  September 2019





Address Line 1

Address Line 2





Good morning


I write to you in my capacity as a trustee of the XXXX Trust which I will call "The Trust."


Your parents formed the trust in 19XX and arranged that they, their children and grandchildren would all be beneficiaries of it. The Trust is what is known as a "Discretionary Trust".  This means none of the beneficiaries have any right to any money or property from the Trust.  Each of the beneficiaries has only a right to be considered by the trustees for a distribution.


Discretionary trusts are common in New Zealand. They are generally established by parents for themselves and their family.  The parents will typically want to try to ensure they have enough funds to support themselves from the Trust for the rest of their lives.


Trusts are set up for a number of reasons including asset protection, creditor protection, avoidance of death duty, rest home subsidiaries and/or relationship property purposes.


Many parents have not wanted to inform the children of the fact that the Trust has been created and that the children are discretionary beneficiaries of it, from a fear their children, on learning these things, might become demotivated in the expectation that they will receive substantial sums of money from the Trust.  This is not intended to be the case with the XXXX Trust.  Your parents made it clear when the Trust was created that it was not to become a means for demotivating children. If the trustees believe making a distribution to a beneficiary may weaken a child's resolve to work hard and succeed on his/her her own merits, the trustees are unlikely to make distributions to that person.


If the trust has sufficient liquid assets to be able to make distributions, the trustees may be willing to consider making loans to children or assisting them with the payment of educational fees in the hope that such forms of financial assistance will assist the child to further his or her career based upon his/her own self-motivation.


Beneficiaries of the Trust are entitled to be given a copy of the Deed of Trust (most New Zealand Trusts are formed with such a document) together with the Trust's annual financial statements.  If you would like to see the Deed of Trust and the Trust's most recent financial statements can you, please let me know and I will provide you with copies of them.


You should feel free to contact me or any other trustee if you want more information about the Trust but in doing so you should be aware that in general, trustees do not have to disclose any details of the discussions and deliberations concerning any distributions they make or decide not to make.


If in the years ahead you would like to bring to the trustees attention any reasons why you consider they should make a distribution to you, you should feel free to do so, you should be aware the trustees are likely to be guided in their response by some fundamental principles, namely:

  • They do not intend to make distributions they consider may result in a beneficiary being demotivated in their studies and/or ambitions;
  • They may be sympathetic to requests for financial assistance where the provision of such assistance will assist the beneficiary to advance more quickly down a career path; and
  • They will want to ensure the Trust has a constructive and not a destructive, effect on family relationships and on a beneficiary's degree of motivation to succeed in life.


They will not want to make distributions if they may be intercepted by a spouse/partner or by a creditor.


The Trusts primary beneficiaries shall remain the Trustees primary concern at this point in time.


Why do We Need to Ask For Information

Why we need to ask for information

New Zealand has passed a law called the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (we will call it the AML/CFT law). The purpose of the law reflects New Zealand's commitment to the international initiative to counter the impact that criminal activity has on people and economies within the global community.

Recent changes to the AML/CFT Act mean that from 1 October 2018, accountants are required to comply with its requirements. This law requires accountants to do a number of things to help combat money laundering and terrorist financing, and to help Police bring the criminals who do it to justice. The AML/CFT law does this because the services accountancy firms and other professionals offer may be attractive to those involved in criminal activity.

The law says that accountancy firms and other professionals must assess the risk they may face from the actions of money launderers and people who finance terrorism and to identify potentially suspicious activity. To make that assessment, accountants must obtain and verify information from prospective and existing clients about a range of things. This is part of what the AML/CFT law calls "customer due diligence" ('CDD').

CDD requires an accountancy firm to undertake certain background checks before providing services to clients or customers. Accountants must take reasonable steps to make sure the information they receive from clients is correct, and so they need to ask for documents that show this.

We will need to obtain and verify certain information from you to meet these legal requirements. This information includes:

  •   your full name; and
  •   your date of birth; and
  •   your address.

To confirm these details, documents such as your passport (preferred), driver's licence or your birth certificate, and documents that show your address, such as a current bank statement will be required.

If you are seeing us about company or trust business, we will need information about the company or trust including the people associated with it (such as directors and shareholders, trustees and beneficiaries). If we don't already have this information.

We may also need to ask you for further information. We will need to ask you about the nature and purpose of the proposed work you are asking us to do for you. Information confirming the source of funds for a transaction may also be necessary to meet the legal requirements.

If we are not able to obtain the required information from you, it is likely we will not be able to act for you. We will be precluded to do so by law.  Before we start working for you, we will let you know what information we need, and what documents you need to show us and let us photocopy.

Please contact us if you have any queries or concerns.

Hamish Pryde – Coombe Smith (PN) Limited – AML Compliance Officer


New Trust Law proposed

New Trust Law Proposed

There is a bill currently before Parliament which when enacted will be the first big change to New Zealand's trust law in more than 60 years.  There is estimated to be more than 500,000 Trusts operating in New Zealand. Nobody knows for sure as there is no central trust register like the company's register. Read more…