COVID-19 Update
Wage Subsidy Scheme:
Key stages and risks
Tax Tips Alert April 2020
Following the implementation of the Wage Subsidy Scheme introduced by the Government to support
employers and workers adversely affected by COVID-19, the Ministry of Social Development (MSD)
has released details of the employers that have claimed the subsidy and the amounts claimed.
There is also increasing scrutiny on businesses as to whether the subsidy has been passed onto
employees. In addition, MSD has always maintained its intentions to audit businesses that have
claimed the wage subsidy, in order to confirm they do in fact qualify. It is important for businesses
to consider how they can evidence their eligibility for the wage subsidy and the use of those funds
should they be audited.
We have previously summarised the
Wage Subsidy
We discuss below the key risks that a business may
Scheme. However, due to the rapidly evolving nature of
face in relation to an ineligible claim. We also set out
the situation, the Government has also been evolving the
the various stages of a claim and specific issues that
Wage Subsidy Scheme. As such, it may be difficult for
businesses should be particularly aware of when making,
businesses to keep track of the changes and ensure that
reviewing, or supporting a claim.
they qualify for the subsidy. The other aspect businesses
should consider is how they can demonstrate their
eligibility if they are audited by MSD.
What are the risks if a business gets it wrong?
There are a number of issues that businesses should
This can result in partial or full clawback of the
consider if they have already claimed the subsidy, or if
subsidy also. Furthermore, there is an increase of
they intend to claim. These include:
scrutiny on employers as to whether the subsidy has
•
Incorrectly applying the various eligibility criteria
been applied appropriately to employees.
resulting in a claim being made where a business
does not qualify – this can result in a partial or ful
•
Transparency with employees or key stakeholders
clawback of funding and also, potential y, significant
– it is essential for the business to keep an open
reputational damage if businesses are seen to
and transparent line of communication with the
be wrongfully taking advantage of government
relevant parties at all times, so they are ful y aware
subsidies. For example, determining whether a
of the situation and have a chance to ask questions.
business meets the 30% decrease of revenue may
In particular, care needs to be taken to ensure
not be as straightforward for certain businesses
compliance with employer obligations and to
including startups, high growth businesses,
provide clarity that the subsidy has been passed on
or businesses with more complex revenue
to employees.
recognition models, or where the situation and rules
•
Director duties – claiming a government subsidy is,
have changed.
in a significant proportion of situations, outside of
•
Misuse of funds once obtained, particularly when
the “normal course of business”. Therefore, there
the calculation of employees “normal” wages is
is a risk that directors may be chal enged in their
difficult – examples of this may be for businesses
decision to claim the subsidy, meaning they should
with seasonal or commission-based workers.
get comfortable that they are doing the right thing in
their role as director before making a claim.
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What are the risks if a business gets it wrong?
There are a number of issues that businesses should consider if they have already claimed the subsidy, or if they intend to
claim. These include:
1
2
3
4
5
Eligibility and
Submitting an
Evidencing
Ongoing
Future
approvals
application
application
review
audit
Stage 1 – Considering eligibility and
Stage 2 – Submitting an application
approval requirements
Currently, the level of information the MSD requires for
Eligibility
a claim is minimal, meaning that in most scenarios this
Before making a claim, it is essential for individuals and
stage is very straightforward. However, individual entries
businesses to get comfortable that they do in fact meet
are required for each employee, which can be onerous
all of the various conditions.
for larger employers.
For example:
PwC has developed a number of methods to automate
the population of the application, which can save a
•
Can you demonstrate at least a 30% reduction in
significant amount of time and ensure businesses obtain
revenue has occurred as a result of COVID-19? This
the funds as quickly as possible.
can be particularly complex for businesses with
more complex revenue recognition processes or
where the business is a startup or high growth.
Stage 3 – Evidencing an application
•
Can you evidence that you have taken active steps
We strongly recommend that a business prepares the
to mitigate the impact of COVID-19, and if so is this
relevant documentation and evidence at the time of
enough to support a claim?
the claim. This creates support that the business had
based the decisions around eligibility on the information
•
Can you evidence that you have made “best
available at that point in time. This means that, if there
endeavours” to pay at least 80% of the employee’s
is a subsequent change in focus or interpretation of the
ordinary salary or wage?
rules, the business can evidence they did the right thing
at the time of making a claim. Subsequent changes can
One way businesses can assess their eligibility is via
then be dealt with accordingly, with comfort that the
the preparation of 12 week rol ing cashflow statements,
business has always operated and applied the rules in
which are updated weekly. These cashflow statements
good faith.
can be used to evidence the impact of COVID-19 and
also that the business has used its best endeavours
Businesses should review the information before the
to pay at least 80% of the employee’s ordinary salary
MSD begins its audit. Where no documentation has been
or wage.
maintained at the time of the application, we strongly
recommend that this information is col ated now to
Approval requirements
support a future audit whilst there is still plenty of time.
As well as these tests it is essential that the business
obtains the relevant authorisations from employees in
If there is any doubt as to whether a business qualifies,
order to make a claim on their behalf.
or if there are any gaps in the evidence that can be
provided, consider having a third party evaluate the
Furthermore, is the business comfortable that it has
documentation to obtain comfort that the claim is
engaged with its key stakeholders with regards to the
reasonable and advice as to what further information is
claim? This is hugely important as the public can access
required to support the claim.
a list of everyone who has claimed the subsidy, meaning
if stakeholders find out online rather than from the
business, this can lead to a more difficult conversation as
compared to a situation where they were ful y aware and
involved in the decision-making process.
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Stage 4 – Ongoing review
Stage 5 – Future audit
Given the speed with which COVID-19, the economy, and
The MSD is yet to release exactly how they intend to
rules are all developing, it becomes extremely difficult to
audit businesses that have claimed the subsidy, and
predict where businesses will be in a month’s time, next
what information they will expect to see. However, we
week, or even tomorrow.
would recommend that a business col ate relevant
information now and assess if any further information is
This means that subsequent claims may be required,
required once further details have been released so they
claims may later be determined to have been wrongly
can promptly respond to any requests from the MSD.
made (e.g. where a business is subsequently deemed to
be an essential service and resumes business as usual)
Businesses should respond to an audit from MSD in a
or historic claims may need to be amended.
clear and concise manner, in a way that demonstrates
they have considered and met each of the relevant
It is important to keep considering the position and,
requirements. If there are any areas of subjectivity these
when an amendment is required, how to deal with this.
should be clearly explained, and the evidence supporting
the ultimate decision made by the business included
In addition to this, there are a number of complexities we
within the response.
have seen when considering the use of subsidy funding
once obtained. An example of this is how employers
For additional comfort, or where there are areas of
should calculate an employee’s “normal” wages, which
subjectivity, the business should consider having their
is particularly difficult for seasonal or commission based
response evaluated prior to submission.
employees in industries such as tourism, sales and
hospitality.
Furthermore, businesses wil need to consider how
to account for the subsidy, how the subsidy impacts
PAYE and annual leave entitlements and other practical
reporting implications.
How PwC can help
Since the introduction of the Wage Subsidy Scheme, we
documentation to evidence eligibility. Our Wage Subsidy
have supported hundreds of clients and their specific
Scheme support framework includes:
queries as they progress their applications through the
•
application templates
stages referred to above. We have built a substantial
knowledge base in relation to the diverse range of
•
standardised application evaluation methodology
issues businesses may face and how to deal with
•
individual application gap analysis, and
these. In addition to this, we have kept an open line of
•
assistance with resolving identified issues.
communication with officials right from the start to help
businesses get clarity in relation to how the rules should
We can tailor our assistance based on the size of your
be read/applied.
business, the level of comfort you require, and the stage
of your wage subsidy claim.
We have used our experience and developed a
framework to help businesses navigate the eligibility
If you have any questions, please get in touch with one
criteria and, more importantly, to maintain appropriate
of the COVID-19 team below or, alternatively, speak to
your PwC adviser who has the resources and contacts to
assist you.
Contributors
Phil Fisher
Sandy Lau
Leigh Tomei
Peter Budden
Partner
Partner
Partner
Manager
+64 27 462 7505
+64 21 494 117
+64 22 301 3652
+64 21 843 893
[email address]
[email address]
[email address]
[email address]
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