Income Relief Payment: Tax-free weekly payments of almost $500 announced for workers laid off due to COVID-19

Full-time workers who lost their job because of the economic impact of COVID-19 will now be eligible for tax-free weekly payments of almost $500 a week for a period of 12 weeks.

Finance Minister Grant Robertson and Social Development Minister Carmel Sepuloni said on Monday the package is expected to cost the Government about $570 million.

Those normally working 30 hours or more a week who lost their job because of COVID-19 will receive $490 a week, while part-time workers in the same position will receive $250 a week. 

Who is eligible?

To receive the Income Relief Payment, you must be a New Zealand citizen or a resident who normally works and lives in New Zealand, and you must have lost your job between March 1 and October 30. 

Payments will only begin after June 8 and won't be retrospectively paid. So, if you lost your job before June 8, you won't be back-paid. 

You will not be eligible if you receive a redundancy payment of $30,000 before tax or more, income protection insurance payments or earnings-related ACC payments. 

You also cannot receive the payments if you receive a main benefit at the same time. However, if you are eligible for the Income Relief Payment, you can opt to receive that instead of the main benefit. 

Someone with a partner who is working can still be eligible for the payment, as long as their partner is earning less than $2000 per week. 

The Government has expectations of those who apply for the scheme.

You must be available for, and actively seeking, work opportunities and be taking "appropriate steps" towards gaining new employment, and looking for opportunities for re-deployment and training.

For those people who do not do not manage to find work during the 12 weeks receiving the payment, they will have to go onto the Jobseeker benefit. 

The number of people receiving the Jobseeker benefit increased by 43,500 between March 20 and May 15 - from around 145,000 to 188,500.

Many of them are likely to be eligible for the Income Relief Payment, so from June 8, the Government expects a number of them will chose to move from a main benefit to the new option. 

Given the uncertainty around the economic impact of COVID-19, the Government cannot say exactly how many people will be eligible for the payment, but based on Treasury forecasts, it could be around 230,000 people. 

The scheme sits alongside the wage subsidy scheme which has so far paid out around $11 billion to more than 1.7 million New Zealanders, to keep them in work. 

The Government unveiled a $50 billion COVID-19 support package in Budget 2020, including $3.2 billion to extend the wage subsidy scheme in a more targeted way, provide free trades training, and boost infrastructure. 

Does it look familiar?

The Income Relief Payment scheme has similarities to the ReStart package announced in 2009 for workers who lost their jobs in the Global Financial Crisis.

It also resembles the Job Loss Cover introduced by the previous National-led Government during the Canterbury earthquakes.

"We know these schemes reduced the impact on people who lost their jobs due to those shocks," Robertson said. "They show how important it is for people to have a safety net to support themselves and their families as they look for new work or retrain."

Robertson confirmed that work is underway on the possibility of a more permanent unemployment insurance scheme in New Zealand.