Do I need to pay tax on my wage subsidy?

Question

Accepted Answer

The wage subsidy should be passed onto you by your employer and processed as part of your normal wages. It's a gross amount, meaning that you'll need to pay tax on your wage subsidy payment as it’s paid to you as part of your normal wages. This means it has the usual employer deductions like PAYE, Student Loan, KiwiSaver, Child Support etc.
If your total wage (the subsidy plus any employer-funded pay) amounts to your same wages as previously, the pay and deductions on your payslip should be the same. Your employer may choose to top up the subsidy with cash payments or annual leave by agreement, but this should be arranged between them and you.
Your employer won't be liable for income tax or GST on the subsidy and so won't be able to claim an income tax deduction for wages paid out of the wage subsidy. However if you're self-employed you need to account for income tax on the wage subsidy, as it's payment to replace loss of personal earnings. You should include the subsidy, in addition to your regular income for the rest of the year, in your tax return. The subsidy is only tax-free as excluded income for you as a self-employed person if you use it to subsidise your employees' wages.
There's only a need for your employer (or you if you're self-employed) to repay some or all of the COVID-19 Wage Subsidy if your employer:
• is no longer meeting the criteria for the subsidy
• isn't meeting their obligation to use the subsidy to retain and pay their employees
• gets insurance (eg, business continuity insurance) for any costs covered by the subsidy
• provided false or misleading information in their application.
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