Getting ready for a wage subsidy audit

Audit Graphic

We are now starting to field queries from clients who have been selected by Inland Revenue to audit their wage subsidy payments.

Some of these audits have been prompted by April/May GST returns that have triggered an alert, or it may be a random selection by an IRD auditor to check up on this “high trust model” actioned by the Government. In other instances, media reports suggest a focus is also being taken on businesses where a complaint has been made against them.

Even if you haven’t been selected for an audit and the process is ongoing, here are some key things you should consider if you took up the offer to subsidise wages for your staff and/or yourself.

  • Do you have appropriate proof of eligibility? What proof do you hold that you had a 30 per cent revenue decline? If your application was made on a predicted drop in revenue, did the drop materialise?
  • What evidence do you have that the drop was due to COVID-19 and what did you do to mitigate the impact? With many businesses being forced to close, this may be easy to demonstrate, but a significant number of businesses were able to trade from home, as essential services, or support to essential services.
  • Did you use best endeavours to pay staff 80 per cent of their earnings? If not, why not? What information did you rely on in the decision to pay staff less? Did all staff agree to the reduction in writing or by email?
  • Did you use cash reserves to meet employee payments? Were there any costs savings used to continue to pay staff? What amounts were there and what was used towards staff payments?
  • Did you have discussions with bankers and other advisors? Do you have a record of who you spoke to and when, and what advice was received?
  • Have you advised the Ministry of Social Development of any changes in staffing levels e.g. redundancies, resignations? Did all staff agree for their details to be used in the application? Did you apply for the correct rate for each employee (+/- 20hrs)?

Knowing these answers is a great start, but do you have an electronic or hard copy file containing all of the above? If you do have concerns about your eligibility, or your ability to substantiate your subsidy application, then please get in touch with us to discuss your situation.