Self-employed customers and other individuals who received a wage subsidy or leave support payment from the Ministry of Social Development (MSD) due to COVID-19 will need to account for this income in their income tax returns where the payments have not passed through the PAYE system.
'Other individuals' are people who received a subsidy payment without tax deducted at source, for example: non-PAYE shareholder-employees, partners, trustees, Look-through company owners, students, and home-based childcare providers.
These payments are not subject to GST and should not be included in a GST return.
Payments to sole traders are not subject to ACC levies.
Companies with non-PAYE shareholder-employees, who have received the wage subsidy for these employees are liable to ACC levies on these amounts paid as a salary. These amounts should be included in the IR4S shareholder details section in the IR4 income tax return. The amount allocated as shareholder salary should be split between the portion funded by the wage subsidy and the usual shareholder salary for the shareholder(s) IR3. The shareholder should return their salary funded by the wage subsidy in the 'Government Subsidies' field of their IR3 and the balance of the shareholder salary in the 'Total shareholder-employee salary' field.
If payments received under the schemes were received before 31 March 2020, the payment amounts can be spread over the 2020 and 2021 income years.
If payments received under the schemes were received between 1 April 2020 and 31 March 2021, the payment amounts may be able to be spread over the 2021 and 2022 income years. Here's more information to help you:COVID-19 Self-employed
How to include these payments in your tax return
For the 2020 year, include payments from these schemes in the 'Other income' field in your tax return. This lets us know ACC levies are excluded from this income.
For the 2021 year, include payments in the 'Government subsidies' field in your tax return. This field is not subject to ACC.
If you’ve made a partial repayment to MSD in the same year you received the subsidy, put the net amount (total received minus repayments made) in your return.
If you've made a partial repayment to MSD in any year after the year you received the subsidy, here's more information on how this should be treated:COVID-19 Self-employed
If you use the Accounting Income Method (AIM)
If you've not already accounted for the wage subsidy or leave payment for provisional tax in a past AIM period, do so in your next AIM period.