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COVID-19 Omicron Business Support

Tax Alert - February 2022

With the move into the red traffic light setting at 11:59pm on 23 January 2022 and the concern that soon many employees will be unable to work because they’re self-isolating from the omicron variant of COVID-19, businesses should be looking at whether they could be claiming either the Leave Support Scheme (LSS) or Short-Term Absence Payment (STAP) to help deal with the financial burden of paying staff who are unable to work.

Many employers may not have looked at these schemes as they couldn’t be claimed at the same time as a wage subsidy was claimed. In summary, the LSS provides a payment when a person (or a dependent) is required to self-isolate due to COVID-19, potential exposure to COVID-19, or they are considered “higher risk” if they contract COVID-19 when there is active community transmission; the STAP is designed to provide employees who are self-isolating while they (or a dependent) await the result of a COVID-19 test. In both cases, the employee needs to be unable to work from home in order to be eligible. Neither test looks at the financial position of the employer. Both payments are administered by the Ministry of Social Development (MSD).

What are the payments?

The LSS is paid at the rate of:

  • $600 a week for full-time workers (those working 20 hours or more a week).
  • $359 a week for part-time workers (those working less than 20 hours a week).

To be eligible for a one-week payment of Leave Support Scheme an employee needs to have been advised to self-isolate for at least four consecutive calendar days. If an employee needs to isolate for an additional 7 days, a second payment can be claimed. Claims can be made to cover each subsequent 7-day self-isolation period. This table summarises the claims that can be made:
 

Actual number of consecutive days in self-isolation (inclusive)

 

Number of consecutive days in self-isolation rounded to the nearest 7 days

 

Number of weekly payments

 

0 - 3

 

0

 

none

 

4 -10

 

7

 

1

 

11-17 days

 

14

 

2

 

18 - 24 days

 

21

 

3

 

25 - 31 days

 

28

 

4

 

32 - 38 days

 

35

 

5

 

LSS applications can be made retrospectively without time limits, however at present a retrospective claim can only be made in 1-week increments even if an extended self-isolation period has concluded.

The STAP is a one-off payment, paid at the rate of $359 for each employee who meets the eligibility criteria. Generally, a business can only apply once in a 30-day period for each eligible employee unless the employee has been formally advised by a doctor or other health official of the need to seek an additional test. STAP applications can be made retrospectively up to 8 weeks after the relevant test was taken.

Like Wage Subsidies, LSS and STAP payments are not subject to income tax (unless received by a self-employed person) and tax deductions are not available. GST is not required to be returned on the receipt of either payment.

What are the eligibility criteria?

For businesses who have claimed COVID-19 wage subsidies over the previous two years, many of the criteria will be familiar; for example, the employer must be registered and operating in New Zealand, employment laws must be followed, best endeavours must be made to continue to pay employees at least 80% of ordinary salary and wages, the application must be discussed with the employee and their consent must be received to make the application etc. As with the wage subsidy, the schemes are also open to self-employed individuals.

For the LSS, the key additional criteria taken from the MSD website are:

  • The employee must have been advised to self-isolate for a period of at least four consecutive days for any one of the following reasons (and be unable to work from home for that period):
    • they have COVID-19; or
    • they are a close contact of a person who has COVID-19; or
    • they are the parent or caregiver of a dependant who has been advised to self-isolate; or
    • they are in the category of people most at risk of severe illness from COVID-19; or
    • they have household members in the category of people who are most at risk of severe illness from COVID-19.
  • The employee, or their dependant, must have been advised to self-isolate by any one of the following:
    • a medical officer of health (as defined in the Health Act 1956) or their delegate e.g. the Ministry of Health or a public health unit; or
    • a medical practitioner (as defined in the Health Act 1956); or
    • the National Investigation and Tracing Centre.
  • Employees, or their dependants, who have been named as someone who must stay at home or in a managed isolation facility under the relevant legislative order or direction outlined in the declaration are also eligible, as long as they are not self-isolating because they have returned from overseas.

It is important to note that household members and secondary contacts of close contacts and casual contacts of someone with COVID-19 do not meet the LSS eligibility criteria. Employers and employees will need to ensure they understand the Ministry of Health contact classifications.

To be eligible for the STAP, an employee needs to be seeking a test and self-isolating in accordance with public health guidance (e.g., someone who has not been assessed by Healthline or a doctor as needing a test will not be eligible). Employees subject to routine workplace testing or surveillance testing, aircrew, anyone outside of New Zealand or in managed isolation facilities will not be eligible for the STAP.

The LSS and STAP require that the relevant employee be unable to work from home for the relevant period. While the scheme was naturally designed to apply to businesses where employees are physically required to go to the workplace (e.g., cafes, supermarkets etc), it can also apply to workers who are ordinarily able to work from home but physically are unable to work because they are unwell with COVID-19.

An employer cannot be receiving the STAP and the LSS for the same employee at the same time.

What’s been the uptake so far?

The LSS has been around in various iterations since March 2020; as at mid-January 2022, 60,303 applications have been made, with 32,913 applications approved and $151.7million paid out under the scheme. The STAP was introduced in February 2021, with 36,597 applications made to date, 30,918 application approved and $19.2million paid out. For comparison, the most recent 8-round August 2021 Wage Subsidy had 1.26 million approved applications and paid out $4.783billion in wage subsidies. The total amount of business support payments across all the wage subsidies and leave schemes has been $18.977billion since March 2020.

Other Business Support

Under the previous Alert Level system, additional business support was available in the form of Wage Subsidies and Resurgence Support Payments. These are no longer available, but there are still some forms of business support which business can consider accessing.

Businesses with 50 or fewer employees can be eligible to apply for a Small Business Cashflow Loan. This scheme, administered by Inland Revenue, allows certain businesses to apply for a loan of up to $100,000. The maximum value of the loan available is $10,000 plus $1,800 per full time equivalent employee. Loans are interest free for a period of up to two years (if fully repaid in that time).

Businesses are also able to take advantage of concessions around the timing of tax payments, so any businesses with cash flow concerns should also consider talking to their accountant about these options.

If you have any questions in relation to the issues discussed above, please consult your usual Deloitte advisor.

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