Last updated 15 May 2020.
This FAQ answers questions pertaining to Work and Income NZ’s support for self-employed contractors, freelancers, and sole traders in New Zealand as related to the Coronavirus (COVID-19).
For medical questions related to the COVID-19, please refer to the Ministry of Health’s questions and answers page.
If you have a medical emergency, please seek help from Emergency Services or dial 111.
If you believe you may have COVID-19, please refer to the Ministry of Health’s COVID-19 (novel coronavirus) – health advice for the general public. They have been asking people to call the dedicated COVID-19 0800 Healthline (0800 358 5453) before seeking out medical care.
Work and Income COVID-19 Wage Subsidy
These questions relate to the Work and Income COVID-19 Wage Subsidy. For the latest information on this and other COVID-19 support measures, please refer to the COVID-19 employer support page on Work and Income NZ’s website.
For information about the Wage Subsidy Extension, which is open for applications on June 10, 2020, visit the Wage Subsidy Extension support page.
I will lose income due to COVID-19. Am I eligible for a wage subsidy?
If you’re self-employed and “have experienced a minimum 30% decline in actual or predicted revenue over the period of a month when compared with the same month last year, and that decline is related to COVID-19,” then you may be eligible for the COVID-19 Wage Subsidy.
You also must:
- usually be earning the minimum wage when you decide to self-isolate; and
- have been expecting to work for the period of self-isolation; and
- not be able to draw an income for the period of self-isolation.
- be legally working in New Zealand; and
- have taken active steps to “mitigate the impact of COVID-19.”
What do I need to do to prove my 30% decline in actual or predicted revenue?
To demonstrate that your business has experienced a decline in revenue, you must “compare one month’s revenue against the same month the previous year (e.g. February 2020 compared with February 2019).” If the revenue of the affected month was or is 30% less than the month to which it was compared, then you meet that requirement.
If you’ve been operating for less than a year, then you must compare your revenue against “a previous month that gives the best estimation of the revenue decline related to COVID-19.”
N.B. For self-employed contractors with variable monthly income, the Minister of Finance mentioned you may be able to use an average monthly income as a point of comparison, but the official page does not yet outline a method of doing so.
What does it mean to have taken “active steps to mitigate the impact of COVID-19?”
The “active steps” mentioned above could include “activating their business continuity plan” as well as “seeking advice and support from:
- their bank
- the Chamber of Commerce
- a relevant industry association
- the Regional Business Partner programme.
How much is the COVID-19 Wage Subsidy?
Work and Income NZ state that “the COVID-19 Wage Subsidy will be paid at a flat rate of:
- $585.80 for people working 20 hours or more per week
- $350.00 for people working less than 20 hours per week.”
The subsidy covers 12 weeks. Beneficiaries of this subsidy will receive it as a single lump sum payment.
Do I need to pay tax on the COVID-19 Wage Subsidy?
Yes. The COVID-19 subsidy is a payment to replace lost income, and so all taxes are applicable as normal. The payment is not subject to GST, however the following taxes are still payable on the income:
- Income Tax
- ACC Levies
- Student Loan (where applicable)
As per the IRD website, if you are self-employed you will need to account for Income Tax on the wage subsidy and include it in your IR3 tax return at the end of the financial year. The entire payment amount of the subsidy will need to be recognised on your Tax Return in the financial year it was received. For instance if you receive the wage subsidy before 1st April 2020, you will need to enter the full amount of the payment on your 2019/20 IR3 return. If you receive the payment after April 1st 2020, you will need to enter the full amount of the payment on your 2020/21 IR3 return.
N.B. Various websites, accountants and tax agents have misunderstood the advice around paying tax on the wage subsidy. This is due to confusion around the difference between an employer who applies on behalf of their staff, and an individual that applies as a sole trader, freelancer or contractor. For full clarity:
- If you are an employer, and you receive the wage subsidy on behalf of your staff, you should not recognise that payment as income for your company (therefore your company does not pay tax on it), and you should not declare it for GST purposes on your business GST return. You simply use the wage subsidy funds to pay your staff, and deduct their taxes via PAYE as with any usual salary payment to your staff.
- If you are a self-employed individual, sole trader, contractor or freelancer, and you apply for the wage subsidy for yourself, the payment is in lieu of lost income, and therefore the above taxes are applicable on this payment as per any usual income you would receive. (There is no GST on the wage subsidy payment, however).
How do I apply for the COVID-19 Wage Subsidy?
You can apply for the COVID-19 Wage Subsidy online. Simply fill out and submit the Self Employed/Contractor version of the COVID-19 Wage Subsidy and Leave Payment Application Form.
From the dropdown menu at the top of the form, select “my business has been impacted by COVID-19 and I am/or about to experience at least a 30% decline of actual revenue.”
You will also need to enter your:
- IRD Number
- Employment type (20 hours or more per week/less than 20 hours per week)
- Company Name (trading name)
- NZBN (if applicable - you can leave blank or use your IRD number if not)
- Business address
- Contact name, email, and mobile phone number
- Bank account details
The form asks for my Company Name. Do I need to be registered as a business to receive the COVID-19 Wage Subsidy?
You do not need to be registered as a business to receive the COVID-19 Wage Subsidy. However, in the definitions for Wage Subsidy qualifications, you do need to have the following:
- a personal IRD number for paying income tax and GST, and
- government licences and permits for their business needs, and
- qualifications or registrations for their trade or profession.
Sole traders must still meet the requirements to be physically located and legally working in New Zealand.
If you are not registered as a business, then:
- Enter your personal IRD number on the form rather than a business IRD number
- Leave the NZ Business Number (NZBN) field blank, and
- Enter your trading name in the Company Name field. For most self-employed workers this will be their full name.
Can I apply for the Wage Subsidy Extension while still receiving initial Wage Subsidy payments?
Unfortunately, you can’t apply for the Wage Subsidy Extension until your 12 week Wage Subsidy has finished.
How long will the Wage Subsidy extension last?
The extension will last 8 weeks from the date you submit your application.
Work and Income COVID-19 Leave Payment
These questions relate to the Work and Income COVID-19 Leave Payment. For the latest information on this and other COVID-19 support measures, please refer to the COVID-19 employer support page on Work and Income NZ’s website.
I am unable to work due to COVID-19. Am I eligible for a Leave Payment?
If you are unable to work due to COVID-19, you may be eligible for a Leave Payment. The COVID-19 employer support page outlines three types of situations which may qualify a self-employed worker for the COVID-19 Leave Payment:
Situation #1: you’re self-employed and need to self-isolate in line with Ministry of Health Guidelines, and also:
- have registered as needing to self-isolate with Healthline (0800 358 5453),
- cannot work from home, and
- your self-isolation is not due to leaving NZ since the 16 March 2020 travel restrictions and since returning.
Situation #2: You cannot work because you have been diagnosed with COVID-19.
Situation #3: you cannot work because you are caring for dependents who are required to self-isolate or who are sick with COVID-19
In addition to meeting one of the above requirements, you also must:
- Be legally working in New Zealand, and
- Have taken active steps to mitigate the impact of COVID-19 (see FAQ above in the Wage Subsidy section)
How much is the COVID-19 Leave Payment?
Work and Income NZ state that “the COVID-19 Leave Payment will be paid at a flat rate of:
- $585.80 for people working 20 hours or more per week
- $350.00 for people working less than 20 hours per week.”
The subsidy covers 14 days. Beneficiaries of this subsidy will receive it as a single lump sum payment.
As people may be required to self-isolate more than once, you will be able to apply for this on an ‘as needed basis.’ It appears that the benefit can be paid for the entire period of sickness (or looking after somebody who is sick) with COVID-19; however, it appears the Leave Payment must be applied for every 14 days.
During what period is the Leave Payment active for?
The COVID-19 Leave Payment will be available for 8 weeks from 17 March 2020. As stated above, self-employed contractors are able to apply for this more than once if they are eligible.
How do I apply for the COVID-19 Leave Payment?
You can apply for the COVID-19 Leave Payment online. Simply fill out and submit the Self Employed/Contractor version of the COVID-19 Wage Subsidy and Leave Payment Application Form.
From the dropdown menu at the top of the form, select the option that best applies to you:
- “My staff are self-isolating due to COVID-19 or caring for a dependent who is self-isolating due to COVID-19 and cannot work from home,” or
- “My staff are sick with COVID-19 or caring for someone who is sick with COVID-19 and can’t work from home.”
You will also need to enter your:
- IRD Number
- Employment type (20 hours or more per week/less than 20 hours per week)
- Company Name (trading name)
- NZBN (if applicable)
- Business address
- Contact name, email, and mobile phone number
- Bank account details
The form asks for my Company Name. Do I need to be registered as a business to receive the COVID-19 Leave Payment?
You do not need to be registered as a business to receive the COVID-19 Leave Payment. However, from the definitions for Wage Subsidy qualifications, you likely will need to have the following:
- a personal IRD number for paying income tax and GST, and
- government licences and permits for their business needs, and
- qualifications or registrations for their trade or profession.
Sole traders must still meet the requirements to be physically located and legally working in New Zealand.
If you are not registered as a business, then:
- Leave the NZ Business Number (NZBN) field blank, and
- Enter your trading name in the Company Name field. For most self-employed workers this will be their full name.
What about the small business cash flow loan scheme (SBCS)?
If you operate as a sole trader or self-employed individual, you may be eligible of a loan of up to $10,000. Applications opened on May 12 and will close on June 12. To apply, head to your myIR page and go to the ‘I Want To’ section and then select ‘Apply for the small business loan’. For more info, visit the IRD’s SBCS page.
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