Short answer: Yes, they become part of the employee’s gross earnings.

NZPPA has been in discussion with IRD on this since these new payments were announced and have had it confirmed that both the Wage Subsidy and leave payments are gross payments and PAYE is to be deducted along with all deductions (student loan, child support etc).

There are a lot of consultants creating confusion for payroll with their view of the world as they are seeing that the payment is non taxable to the employer, yes, it is but that is not the employee!

If that is not enough and need a reference on the Work and Income website, it clearly states the following:

Does an employee need to pay tax on a wage subsidy payment?

  • Yes, they will as the subsidy is paid to the employer as part of their normal wages. This means it is subject to the usual PAYE, Student Loan, KiwiSaver deductions, etc.

If I’m an employee do, I need to pay tax if I receive a leave payment because I am in self-isolation?

  • The leave payment will be paid to your employer, and you will receive it like normal wages. This means it’s subject to the usual PAYE, Student Loan, KiwiSaver deductions, etc.

To see the full reference click here

NZPPA will also share our fully worked example that we have had IRD check and approve up on our website under PAYTALK BLOG section.

Our members get access to all the latest information.  We have reduced all NZPPA membership types to support business during this time.  If you want to find out more, please email: [email protected]

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