As you may be aware, the Ministry of Social Development (MSD) is undergoing audits of some applications made for the Wage Subsidy and Wage Subsidy Extension.
If you have documented and recorded all the information required that confirm your eligibility for the Wage Subsidy, then the audit should be straightforward.
We have compiled some information to assist in your preparation in case you are audited.
The Wage Subsidy Scheme was first introduced on 17 March 2020 for twelve weeks ending on 9 June 2020, and the second Wage Subsidy Extension scheme was introduced on 10 June for eight weeks.
The third wage subsidy, the Resurgence Wage Subsidy, which is available to employers nationally as well as self-employed people, is available for 2 weeks. The criteria are similar to the Wage Subsidy Extension scheme and have a revenue drop of at least 40% due to Covid-19.
Applications for the Resurgence Wage Subsidy opened on August 21 and close on 3 September.
Here are the key criteria for the applications to the wage subsidies:
- The business had to be registered in and operating in NZ
- Recipients must agree to a detailed declaration
- Employers had to have written consent from the employee that a wage subsidy would be sought
- Employers had to declare to endeavour to pay and retain their employees at 80% of their regular income after receiving the subsidy
- The wage subsidy had to be passed on in full to employees (unless they earned less)
- Employment laws must still be followed
- Employers were expected to take active steps to mitigate impacts of Covid-19 on their business
- Businesses need to have predicted a 30% or more decline in revenue compared to a comparable period in 2019.
Note: The difference when the scheme was extended, was that businesses had to show a 40% reduction in revenue in the 30-day period prior to the application date versus the nearest comparable period in 2019.
Preparing for an Audit
The key question to ask is, are you confident your business was and remains eligible for the Wage Subsidy?
As mentioned already, you must be transparent and ensure the information required has been documented and in place.
Where there was uncertainty at the time of filling in the declaration form and, in particular, the revenue decrease and amount paid to employees, you are required to have taken steps to show that you assessed, validated and documented the decisions that were made.
For example, did the predicted 30% decline in revenue occur and was it due to Covid-19?
You should provide records of communications with employees regarding their consent to their names for the Wage Subsidy being documented on the declaration form.
Payroll data should be assessed to ensure that employees listed on the declaration form were eligible for the Wage Subsidy during the entire twelve-week and then eight-week period.
Changing circumstances that may impact on the continued eligibility for the Wage Subsidy during the twelve to eight-week period include:
- The varying hours of casual or seasonal workers
- Voluntary leavers or new starters
- Any redundancies
- Whether employees received ACC income assistance.
The eligibility criteria on the declaration form should be considered a checklist. Businesses must document the evidence that satisfies every part of the scheme’s eligibility and should include documentation that demonstrates:
- The revenue drop
- The steps taken to mitigate the impact of Covid-19 on the business
- What cash reserves the business had at the time of making the claim
- What discussions were had with bankers, advisors, or insurers
- What payments were made to employees
- On what basis did the employee cease employment during the wage subsidy.
It is best to organise these documents and evidence about the steps you took to consider Wage Subsidy eligibility into one place so that, if you do find yourself being contacted by an auditor, you can provide them with your information in a timely and transparent manner.
If you are contacted by an auditor and you feel that you didn’t meet the criteria, you can contact MSD directly and discuss your situation.
If you have any pātai or would like to discuss your situation with someone that isn’t in MSD or IRD, you can call 0800 4 POUTAMA and speak to our business advisors.
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