TFS Weekly Update - 30th November 2021

What's in this Weeks update: 

• Tax Free Vaccination 
• New COVID-19 Framework and Business Support 
• COVID-19 Protection Framework (Traffic Lights) 

Tax Free Vaccine “thank you”

As New Zealand inches closer to the 90% double vaccination target, the Government and business community are making every effort to reach the most reluctant individuals.

Many employers are contributing by implementing initiatives to thank employees that get vaccinated. Examples include companies paying varying cash bonuses to their employees or providing prize draws if certain firm wide targets are met. Not only does this benefit the country as a whole, but also helps to minimise the commercial impact of Covid-19.

The question of how such payments are treated for tax purposes naturally arises. Do the payments comprise taxable or non-taxable income to the employee and is it deductible to the employer?

Most payments to employees are taxable and this is likely to be the natural view of most accountants and Inland Revenue staff. However, in very narrow and limited circumstances a payment to an employee is potentially not in connection with employment and does not comprise taxable income – but this is an extremely high ‘threshold’.

An accepted situation in which non-taxable payments can be made to employees that are not in connection with their employment or service is that of hurt and humiliation under section 123(1)(c)(i) of the Employment Relations Act 2000. On this matter, Inland Revenue guidance provides payments for hurt and humiliation are:

“… not compensation for services rendered or actions that occur in normal course of the employment relationship”.

Another example is from Louisson v Commissioner of Taxes where the Court deemed payments by a business to a former employee in recognition of their service to their country during World War II was not taxable to the employee.

Both scenarios are examples of where a payment to an employee is not necessarily related to their employment or service.

We are all currently in the midst of a global pandemic that is impacting economies and lives across the globe. Vaccination is widely accepted as the solution towards a return to normality. Therefore, it appears there are reasonable arguments to suggest a payment in recognition of the personal choice by an individual to get vaccinated and do their part toward a common goal for humanity generally is not in respect of employment or service and therefore is not taxable to the recipient.

For a business, a vaccinated workforce helps minimise the potential negative consequences of having a Covid-19 infected employee within the workplace. Those consequences could include more employees getting infected, customer perceptions (both domestic and international) and infection of employees working for suppliers and contractors, i.e. up and down the supply chain.

The benefits of vaccination to a business are thus evident. This lends itself to the conclusion that payments to employees should be deductible to the employer.

To date, Inland Revenue has been active in providing guidance and implementing various concessions as a result of the Covid-19 pandemic. It has felt very much like they are also doing their part.

We hope that in time, some guidance on this matter is released that takes into account the points raised above and provides a taxpayer friendly view – a situation that warrants it.

New COVID-19 Framework and Business Support

The Government’s announcement on the next stage in the COVID-19 response plan introduces a new framework of measures that will commence when 90% of eligible New Zealanders are fully vaccinated.

The new framework has three levels: Red, Orange and Green. Each has different levels of restrictions. At all levels businesses will be able to operate, in some form, for vaccinated people.

The advice states, If a business, organisation or service does not wish to request proof of vaccine, they will have to operate with strict limits on capacity and space requirements. They may need to close in Orange and/or Red levels.

For more information on the levels visit the Covid 19 website.

Resurgence Support Payment doubles

From 12 November 2021, the Resurgence Support Payment will be paid fortnightly instead of three weekly.

Businesses can receive $3000 per business plus $800 per full-time employee (FTE), up to 50 FTE (up from$1500 plus $400 per full-time employee)

The maximum fortnightly payment is $43,000.

If you are self employed, or a sole trader you can receive a payment of $3,800.

The eligibility criteria remains the same.

The Resurgence Support Payment will continue to be available to businesses anywhere in New Zealand until Auckland moves to the new COVID-19 Protection Framework.

Wage Subsidy Scheme

Applications for the fifth round of the August 2021 Wage Subsidy are now open. You can apply until 11:59pm 28 October 2021. The payment rates and eligibility criteria remain the same.

Additional support for Auckland businesses

Businesses in Auckland will be able to apply for up to $3,000 worth of advice and planning support, and then receive up to $4,000 to implement that advice. This will no longer require a matching contribution and will be delivered through the established Regional Business Partner Network.

There will also be funding available for businesses to apply for mental health support for their employees.

We are here to help

If, like so many businesses you have been adversely affected, talk to us about how we can help. As your accountant, we’ll review your financial position, assist with cashflow planning, advise you on which schemes you’re eligible for, and will help you to produce the relevant financial information that’s needed when making a loan or grant application.

The months ahead and first quarter of 2022 will be a tough time for many business owners, so reach out now and let us help you get the financial assistance and funding you need.

If you’re sick or need time off work because of COVID-19

See what your employer can apply for to help pay your wages or salary if you can’t work because of COVID-19. Your employer can also apply for a wage subsidy if their business is affected because of Alert Levels 3 or 4.

Your employer can apply for financial support to help pay your wages or salary and support their business if COVID-19 affects it. If you’re self-employed, you can also apply for this support.

For more information on this please Click Here.   

COVID-19 Protection Framework (Traffic Lights)

2 December - At 11:59pm, all of New Zealand will move to the framework COVID-19 Protection Framework (Traffic Lights). Auckland will move to Red. Settings for the rest of New Zealand are yet to be decided on.

Green

COVID-19 present, limited community transmission. Hospitalisations are at a manageable level.

100% Vaccinated businesses:

Hospitality - no limits

Gyms - no limits

Close contact businesses - no limits

Gatherings (e.g. weddings, places of worship, marae) -no limits

Events (indoor/outdoor) - no limits

Non fully vaccinated businesses:

Hospitality - max 100 people based on 1m social distancing, seated and separated

Gyms - max 100 people

Close contact businesses - face coverings for staff, 1m social distancing between customers

Gatherings (e.g. weddings, places of worship, marae) - max 100 people based on 1m social distancing

Events (indoor/outdoor) - max 100 people based on 1m social distancing, seated and separated

Orange

Increasing COVID-19 community transmission and increasing pressure on health system.

100% Vaccinated businesses:

Hospitality - no limits

Gyms - no limits

Close contact businesses - no limits

Gatherings (e.g. weddings, places of worship, marae) -no limits

Events (indoor/outdoor) - no limits

Non fully vaccinated businesses:

Hospitality - fully contactless trading only

Close contact businesses, events (indoor/outdoor) and gyms closed

Gatherings (e.g. weddings, places of worship, marae) - max 50 people based on 1m social distancing

Red

Very high unsustainable number of COVID-19 hospitalisations. Action needed to protect at-risk populations.

100% Vaccinated businesses:

Hospitality - max 100 people, based on 1m social distancing seated and separated

Gyms - max 100 people based on 1m social distancing

Close contact businesses - public health requirements in place

Gatherings (e.g. weddings, places of worship, marae) - max 100 people based on 1m social distancing

Events (indoor/outdoor) - max 100 people based on 1m social distancing seated and separated

Tertiary education - vaccinations required for onsite delivery, with capacity based on 1m social distancing

Non fully vaccinated businesses:

Hospitality - fully contactless trading only

Close contact businesses, events (indoor/outdoor) and gyms closed

Gatherings (e.g. weddings, places of worship, marae) - max 10 people

Tertiary education - distance learning only