Tax experts expect the Government to take on board the Auditor-General’s recommendations this wage subsidy rollout
Companies are keeping a close eye on the Ministry of Social Development’s website for updates on the wage subsidy, with applications opening on Friday, August 20, at 9am.
Finance Minister Grant Robertson reassured businesses on Tuesday evening that the wage subsidy scheme and resurgence support payments would be made available to them, following the Prime Minister’s announcement of the country’s moved into Alert Level 4 lockdown.
Robertson also announced the leave support scheme and short-term absence payment rates would also be made available and increased in line with the wage subsidy scheme.
But tax researcher Dr Michael Gousmett says as soon as he heard the latest wage subsidy announcement, he thought about whether it was going to be “another free for all” this time.
“We've known how the system has been worked by some people.”
Construction giant Fletcher Building took a $68 million wage subsidy that it will not be paying back. On Wednesday, the company posted a $350m profit in the year to June following a $196m loss the previous year.
A spokeswoman for the company said Fletcher Building was “grateful” for the wage subsidy but “the reality is the subsidy only covered a portion of the significant losses our business incurred”.
When asked whether Fletcher Building would take the upcoming subsidy, the spokeswoman said it was too early to say. “We are continuing to assess the situation.”
Gousmett says he hopes there will be greater scrutiny in applications.
“It was purely a trust-based thing. And at the time that was fair enough because the Government had to act quickly. But we've had more than a year to think about this.
“I would certainly hope that there's a tighter regime because at the end of the day, we mustn't forget that the Government's borrowing money to pay out this subsidy.”
Gousmett says the wage subsidy register could be more transparent, also including how much a company had repaid.
At present, if a company repays part of the wage subsidy, the amount is subtracted from the original.
As at August 6, $741.6m had been refunded.
He says the public has had to rely on media reports of the original payment received to work out how much businesses repaid.
In May this year, the Auditor-General of New Zealand published a report on the management of last year’s $13 billion wage subsidy scheme.
The report specifically looked at the setup and monitoring of the three wage subsidies rolled out last year: the wage subsidy, wage subsidy extension and the resurgence wage subsidy.
Deloitte NZ partner Robyn Walker says overall the report was positive. However, it had a number of findings, including criticism of MSD’s audits, which were more like verbal confirmations from employers.
The two main recommendations were to ensure that criteria are sufficient for adequate verification and for MSD to put in robust post payment verification measures to ensure the company’s expected losses were actually realised.
Walker says a number of the Auditor General’s recommendations had been adopted for the subsequent wage subsidies, including the two earlier this year, for which employers would receive payments two weeks at a time, rather than the 12 week-lump sum that was given to companies last year to be drip-fed to workers.
She says the wording has also been clarified that the expected revenue drop should be a direct result of the alert level change, which is later expected to be verified.
But verifying a drop in revenue would be tricker for those businesses that were seasonal.
“Say if you’re a ski field, going into spring, your revenue is going to be declining this time of year. So it will be a matter of really documenting and explaining the impact of the alert level change.”
Walker says when compared to Australia, our wage subsidy has been more transparent.
“I think what's been really good about the New Zealand wage subsidy is the transparency that's been there from pretty much the outset of having the register. And if you contrast that to Australia, they've never published any details about who received the job keeper payment, which is their equivalent, causing all sorts of issues over there. There's quite a bit of annoyance and political posturing over it.”
Walker commended Finance Minister Grant Robertson’s speedy announcement of the wage subsidy being available for business during alert Level 4.
Ministry of Social Development group general manager client service support George Van Ooyen says the department has continually improved the wage subsidy since it was first brought in and taken on board some of the Auditor General's recommendations.
Changes made in response to the Auditor General’s recommendations include requiring businesses to show evidence of how revenue declined because of the change in alert levels.
The remaining recommendations from the Auditor General’s report are currently being implemented, Van Ooyen says.
Integrity assurance processes put in place include pre-payment verification of business details, post-payment reviews and investigations, and communications to businesses about their obligations.
“Tens of thousands of applications have been denied based on our reviews and checks,” Van Ooyen says.
After the report, MSD Minister Carmel Sepuloni told the media she was going to take on board the report’s advice and increase the level of integrity checks.
What will be available to businesses
- Wage subsidy scheme: All businesses in the country can apply for this if they expect a loss of 40 percent of revenue as a result of the alert level increase announced on Wednesday. The subsidy rates have been increased to reflect the increase in wage costs since the scheme was first used in March 2020. Businesses will be eligible for $600 per week per full-time equivalent employee, and $359 per week per part-time employee. The Wage Subsidy will be paid as a two-week lump sum. Applications open on Friday 20 August with the first payments usually available after three days.
- Resurgence support payment is available if firms incur a loss of 30 percent of revenue as a result of the alert level increase. This payment is worth up to $1500 plus $400 per full-time equivalent employee, up to a maximum of 50 full-time employees (so up to a total of $21,500).
- Leave support scheme provides a two-week lump sum payment of either $585.80 per week for full-time workers, or $350 per week for part-time workers, who must self-isolate and cannot work from home. More information is available here.
- Short-term absence payment provides a one-off (once per 30 days) $350 payment for workers who must miss work due to a Covid-19 test and cannot work from home. Further information about this payment is available on the MSD website.
