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If you are an employer you will be aware of the ever-evolving rules for compliance to meet the requirements of Inland Revenue and other government bodies. You'll also know this often involves a lot of administrative work on the part of the business owner in order to meet these obligations.

To alleviate compliance costs and administrative burden, the Government is working on modernising the New Zealand tax system to make it simpler and more certain for all New Zealanders. PAYE administration is being reviewed as part of this reform. By utilising modern digital technology, the proposed changes would integrate tax obligations into employers' processes and systems, making tax compliance a part of the process of paying wages as opposed to a separate, additional activity. These legislative changes will be part of a taxation bill to be introduced into Parliament.

The Government state the aim of the proposed changes to PAYE reporting is two-fold:

  • To simplify and streamline PAYE administration in order to reduce compliance costs for businesses and not-for-profit organisations. Research has indicated that similar reforms in GST have already contributed to a reduction of more than 20% in compliance costs

  • To improve accuracy of employee deductions, identify issues faster, eg employees using incorrect tax codes, and reduce the chances of employees missing out on entitlements or incurring debt

It is acknowledged there may be software costs and/or costs associated with changes to processes involved, however the goal is to reduce the extent to which Inland Revenue imposes separate or additional requirements on employers. In other words the intention is to make things easier, and the long-term savings of time and/or money should outweigh any initial implementation costs.

Proposed changes – an overview

  1. Employers would no longer need to file employer monthly schedules (IR348); instead they would file all their PAYE information on a payday basis. "Payday" is defined as the day on which an employer makes a payment of PAYE income to an employee, and "payday basis" means employers would need to file with Inland Revenue within 2, or 7, working days following each payday (see point 4 and 5 below for further detail). For weekly pay cycles, this would mean filing 52 times a year; fortnightly means filing 26 times a year

  2. Employers using payroll software would be able to supply PAYE information to Inland Revenue directly from their payroll system using an integrated filing function. You would not need to leave your payroll program or download/upload reports in order to file PAYE 

  3. Anyone not using payroll software will not be required to start doing so but would still have to file PAYE on a payday basis

  4. The electronic filing threshold (currently set at $100,000 of PAYE and Employer Superannuation Contribution Tax (ESCT) deductions per year) will reduce to $50,000. If you fall under this threshold you will still be able to file using paper forms; anyone over this threshold must file electronically

  5. Anyone falling above the electronic filing threshold, and all payroll intermediaries and employers using payroll software, would be required to file by the second working day after payday; for all other employers it would be seven working days. Employers above the electronic filing threshold but unable to file electronically (eg no access to internet services, or not using computers) can apply for an exemption

  6. The Government is not proposing to change the payment due dates of PAYE and related deductions, however employers will be able to make these payments on payday if they choose to do so

  7. The Government's current payroll subsidy would cease from 1 April 2018

  8. Under the proposed changes, employers would have the option of filing PAYE information each payday from 1 April 2018, and it would become mandatory to do so from 1 April 2019

This is a very brief summary of the PAYE changes being proposed in the taxation bill, and we welcome your questions if you are unsure how these changes, if introduced, may impact your business. Please phone or e-mail our employment, HR and payroll specialist, Vicki Cozens – she will be happy to discuss any concerns with you.

       Vicki Cozens, Chartered Accountant at Ean Brown Partners Ltd

Vicki Cozens

Chartered Accountant

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