Wage Subsidy Extension – Revenue Calculation

Current at Friday 20 August 2021

The Wage Subsidy Scheme is available for eligible businesses to apply from today (Friday 20th August). This subsidy is to cover payments of salaries and wages to employees (or yourself if you are a sole trader). It is available for businesses that have or expect a 40% reduction in revenue.

The amounts available are:

$600 per week per full-time equivalent employee (20 hours or more per week); or
$359 per week per part-time employee (less than 20 hours per week).

The wage subsidy will be paid as a two-week lump sum.

Applications are open now and you can apply via the Work & Income website, here. Applications are only open for 2 weeks.

How to calculate revenue for your wage subsidy claim

Step 1:

1. Firstly, you must continue to bill invoices on the same basis as you did in the prior year

2. You should not defer billing, as this is still accrued income i.e. income you have earned but not yet received

3. You should look at revenue earned and/or invoiced over a 14-day period in the previous six weeks immediately prior to the move to Alert Level 4.

4. You should look at your revenue (including predicted revenue) between 17 August and 30 August 2021.

5. If you have a 40% loss in revenue you qualify (note loss in revenue must be attributable to the move to Alert Level 4)

Step 2:

1. If you do not have a 40% loss in revenue, you may need to look at your work in progress (WIP). However, given it is hard to predict your WIP on the 30th August 2021 we suggest re-assessing closer to the 30th August 2021.

2. You will need to assess your WIP at the start and end of the 14-day period this year and for the same 14-day period in the last six weeks

3. Then you can calculate the revenue earned and/or invoiced in the 14-day period this year compared to the same 14-day period in the last six weeks.

Example 1

o Revenue over 14-days in the last six weeks before the move to Alert Level 4 = $50,000

o Earned/Predicted revenue from 17 – 30th August 2021 = $32,000*

Revenue loss = (50,000 – 32,000) / 50,000

= 36% loss in revenue

o Under test one you do not qualify.

Example 2

o Revenue over 14-days in the last six weeks before the move to Alert Level 4 = $50,000

o Earned/Predicted revenue from 17 – 30th August 2021 = $26,000*

Revenue loss = (50,000 – 26,000) / 50,000

= 48% loss in revenue

o Therefore, you qualify for the wage subsidy

*How to calculate revenue when you have not invoiced yet:

Trades Business Example

o Look at hours to be sold over the 14-days x charge-out rate x standard recovery rate + Materials sold x standard mark-up

o 120 hours to be sold * $75p/h * 91% recovery rate + $10,000 materials sold *1.10 (10% mark-up)

o Predicted revenue = $8,190 + $11,000 = $19,190

o Compare to the 14-day period in the last six weeks

o If down by 40% you qualify.

Retail Shop Example

o Estimate your EFTPOS/till tape sales from 17 August to 30 August 2021

o Compare to a 14-day period in the last six weeks

o If down by 40% you qualify.

What if I get it wrong?

It’s okay to make a claim on a predicted revenue basis now, if you do have a better revenue outcome than you anticipated you must pay the subsidy back once you have identified the improved result.

Eligibility criteria you need to meet:

You must be an eligible employer and your business must be in New Zealand
Your employees must be legally employed by your business and working in New Zealand
You must have at least a 40% decline in revenue and meet the revenue decline test
1. Your business is being affected by the move to Alert Level 4, 17 August 2021
2. At least a 40% decline over the period between 17 August 2021 and 30 August 2021 inclusive (this is the revenue test period), compared to a typical 14-day consecutive period of revenue in the six weeks immediately before the move to Alert Level 4 on 17 August 2021 (this is the default comparator period), or
3. If your business has highly seasonal revenue, you must have at least 40% decline over the revenue test period compared to the same 14 consecutive days in 2020 or 2019 (this is the seasonal comparator period), provided you can demonstrate that the seasonal nature of your business makes it harder to meet the 40% revenue decline using the default comparator period than if your business was not of a seasonal nature, and
4. The calculations and comparisons cannot include any payments to you from any COVID-19 business support grants or subsidies
You must keep evidence from your business to support your declaration that you meet the revenue decline test
Before applying you need to have taken active steps to mitigate the impact of moving to level 4. This includes (but is not limited to) engaging with your bank, drawing on your cash reserves as appropriate, or making an insurance claim.

Source: www.workandincome.govt.nz/covid-19/wage-subsidy/index.html

If you require our support please email our team at covid19@velocite.co.nz