Employer's guide Information to help you with your responsibilities as an employer
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IR 335
January 2008
Employer’s guide
Information to help you with your
responsibilities as an employerwww.ird.govt.nz 1
Introduction How to use this
If you have anyone working for you, it’s your
guide
responsibility to make deductions from payments
you make to them, as well as giving information Part 1 – Your responsibilities as
to us. We explain what you’re required to do, an employer
and what happens if you don’t comply.
Part 1 deals with employers’ day-to-day
If you haven’t yet registered as an employer, responsibilities. It explains who is an employee,
read our First-time employer’s guide (IR 333). and the types of deductions you may have to
You can get this from www.ird.govt.nz or by make from your employees’ wages.
calling INFOexpress—see page 55. It tells you
what you need to know before you register as an Part 2 – Record keeping and
employer. making payments
If you need help with any of your employer This part tells you what records you need to
responsibilities, or you have questions about keep, how often to pay deductions to us, and
anything in this guide, please call us on what forms you need to complete when you pay
0800 377 772. the deductions. It also tells you what to do if
you stop being an employer.
Work permits
If you’re thinking of hiring someone from Part 3 – Other payments
overseas, they need a work permit.
Employers may make payments to their workers
Only citizens and permanent residents of other than normal wages. This part explains the
New Zealand and Australia may work in tax treatment of these other types of payments.
New Zealand without a work permit—everyone
else needs one. You can be fined for knowingly Part 4 – Penalties
employing overseas workers without valid work This part tells you about the penalties and charges
permits. if you fail to meet your tax responsibilities.
For more information on work permit
requirements please call the New Zealand Part 5 – Special types of workers
Immigration Service on 0508 558 855 or go to Part 5 explains how to deduct tax from the
www.immigration.govt.nz payments you make to special types of workers.
Part 6 – Services you may need
Our services, contact telephone numbers and a
list of useful publications.
The information in this guide is based on current tax laws at the time of printing.2 EMPLOYER’S GUIDE www.ird.govt.nz Visit our website for services and information. Go to: • Get it done online to file returns, register for services and access account information. • Work it out to calculate tax, entitlements, repayments and due dates and to convert overseas income to New Zealand currency. You can also check out our newsletters and bulletins, and have your say on items for public consultation. How to get our forms and guides You can view copies of all our forms and guides mentioned in this booklet by going to www.ird.govt.nz and selecting “Forms and guides” or you can order copies by calling INFOexpress—see page 55.
www.ird.govt.nz 3
Contents
Part 1 – Your responsibilities Part 3 – Other payments
as an employer Allowances 33
Who is an employee? 5 Lump sums (extra emoluments) 35
Types of deductions 6 Regular bonuses 38
Deducting PAYE 6 Holiday pay 39
Tax codes 6 Loss of earnings compensation 39
No-declaration rate 7 Honoraria 39
If an employee has a Special tax code Payments to school trustees 40
or deduction rate (IR 23) certificate 8 Life insurance and personal accident
Withholding payments 10 premiums 40
If a worker has a Certificate of Prize money paid at sporting events
exemption (IR 331) 11 and competitions 40
ACC earners’ levy 11
KiwiSaver 12 Part 4 – Penalties
Student loan deductions 12
Late payment penalties 43
Child support deductions 12
Interest 43
Deducting employees’ arrears 14
Late filing penalty 43
Superannuation fund contributions 15
Non-electronic filing penalty 44
Withdrawal tax 17
Shortfall penalties 44
Failing to make deductions 44
Part 2 – Record keeping and Failing to pay deductions to Inland Revenue 44
making payments Evasion 45
Records you need to keep 19 Additional student loan penalties 45
PAYE intermediaries 19 Additional child support penalties 45
Manual record keeping 20 Employee start and finish information
Paying deductions to Inland Revenue 21 penalties 45
Are you a small employer? 21 Audit procedures 46
Are you a large employer? 21 If you disagree 46
Large employers with other pay periods 22
Employer deductions forms (IR 345 and Part 5 – Special types of
IR 346) 23
Completing the IR 345 23
workers
Completing the IR 346 23 Casual agricultural workers 47
Employer monthly schedule (IR 348) 25 Commission agents 47
Child support codes 28 Directors 47
Correcting your IR 348 after it’s been filed 29 Drovers and musterers 47
Electronic filing (ir-File) 31 Election day workers 48
How to pay your deductions 31 Fishers 48
When an employee stops working for you 32 IR 56 taxpayers 48
If you’ve ceased or are about to cease Jockeys and trotting drivers 48
providing fringe benefits 32 Musicians, dance bands and orchestras 48
If you stop paying wages permanently 32 Non-residents 49
If you have ceased or are about to cease Partners in a partnership 50
business 32 Piece-workers and outworkers 51
Running totals 324 EMPLOYER’S GUIDE
Screen production industry 51
Shareholder-employees in close companies 51
Shearers, shedhands and shearing 51
contractors
Spouses or partners 52
Students 53
Subsidised workers 53
Workers engaged in “activity in the
community” projects 54
Workers under labour-only contracts
in the building industry 54
Part 6 – Services you may
need
How to contact us 55
INFOexpress 55
Call recording 56
Business Tax Information Service
and Maori Community Officers 56
Child support services 56
Payroll News 56
Tax Information Bulletin (TIB) 56
Privacy 56
If you have a complaint about our service 57
Publications 58
Index 59www.ird.govt.nz 5
Responsibilities
Part 1 – Your responsibilities as an employer
In this part, we explain the tax codes and Who is an employee?
various types of deductions you’ll need to make
It’s very important you’re sure about whether the
from your employee’s pay. You must pay these
people who work for you are your employees, or
deductions to us by the due dates.
whether they’re self-employed. This is because
The PAYE deduction amounts, used in the tax, KiwiSaver, student loan and accident
examples in this guide, are from the 2008 PAYE compensation laws treat the two groups of
deduction tables. They are based on pay periods people differently. You’re responsible for your
ending on or after 1 April 2007. employees’ tax deductions.
It’s illegal to treat a true employee as self-employed
to avoid deducting tax. If you do this you may
be prosecuted and fined, and still have to pay the
amount of PAYE that you should have deducted.
In most cases it will be quite clear whether or
not someone is an employee. Generally, if you
control how and when the person’s work is
done, the person is your employee.
If you answer “yes” to all or most of the
following questions, the worker is probably
your employee.
● Does the person have to do the work, rather
than being able to hire someone to help?
● Can you tell the worker what to do on the
job, and when and how to do it?
● Do you pay the worker at a set rate
(eg hourly, weekly, monthly, or by unit of
production)? A person paid by commission
or on a piece-work basis may still be an
employee, especially if there are other
employees who work on the same basis.
● Can the worker get overtime or penal rates?
● Does the person work set hours, or a given
number of hours, each week or month?
● Does the person work at your premises, or at
a place you specify?
● Do you set the standards for the amount and
quality of the person’s work?
Note
A person can be self-employed in one line of
work and still work for someone else as an
employee.6 EMPLOYER’S GUIDE
Responsibilities
For more help Tax codes
If you need more help to decide whether your Tax code declaration
worker is an employee, see our leaflet
All new employees must complete a Tax code
Self-employed or an employee? (IR 336). You
declaration (IR 330) when they start working for
might like to go through it with any of your staff
you. If they want to change their tax code, they
whose status is unclear.
must complete a new tax code declaration.
If you’re still not sure, call us on 0800 377 772.
It’s not necessary for your employees to complete
If you decide someone is not an employee, you a new declaration every year, providing their tax
may still have to deduct withholding tax from code remains the same. Each employee needs to
any payments you make to them (see page 10). read the notes on the IR 330 to work out their
correct tax code.
Types of deductions
You must keep the tax code declarations for
PAYE (pay as you earn) is the basic deduction
seven years after the last wages payment is made
you take out of your employees’ wages whenever
to the employee.
you pay them. PAYE includes an ACC earners’
levy (see page 11). Besides PAYE, there are If you need extra forms, you can print them from
other deductions you may have to make from www.ird.govt.nz, photocopy them or order them
your employees’ pay—these include student through INFOexpress—see page 55.
loan repayments, child support and KiwiSaver
Primary employment
deductions.
Most employees have one main job which is
Deducting PAYE their main or only source of income. This job
Each year we send you the PAYE deduction is primary employment. A taxable pension,
tables containing the current deduction rates benefit or student allowance can be primary
so you know how much to deduct from each employment if it’s the main or only source of
employee’s pay. income.
You can use the PAYE calculator at An employee can use only one primary tax code
www.ird.govt.nz to calculate tax deductions for their main source of income at any time, ie,
from an employee’s gross wages. You can M or ML. Employees who are repaying their
also work out how much PAYE you’ll have student loan should use the M SL tax code—see
to account for, if you’ve paid the employee a page 12. The IR 330 explains how to select a
net amount. There’s a separate holiday pay tax code.
calculator to work out tax deductions on holiday Once you have the employee’s tax code, use the
pay. PAYE deduction tables to work out how much
PAYE to deduct from each pay.www.ird.govt.nz 7
Responsibilities
Secondary employment Example
If an employee is already using a primary tax Amy works in the spraypainting division of
code (M, ML or M SL for their main source of Cars & Cars Ltd between 8 am and 5 pm,
income from a job or a benefit) and decides to Monday to Friday, and is paid fortnightly. She
take another job, that other job is secondary also works between 6 pm and 10 pm, Tuesdays
employment. and Thursdays, in the glass division of Cars
The employee must complete another IR 330 & Cars Ltd, and is paid monthly. Amy has
for secondary employment, using one of the completed two IR 330s — the one for the spray
secondary tax codes: S, SH or ST. Employees painting division shows the tax code “M”,
repaying student loans must use the S SL, SH SL while the one for the glass division shows the
or ST SL code if they are already using the M SL tax code “S”.
code for another job.
No-declaration rate
See the PAYE deduction tables for the current Use this rate when an employee or person
secondary tax rates. Employees can choose to receiving a salary, wages or withholding
have their secondary income taxed at a higher payments does not give you a fully completed
rate than would be deducted if they used the IR 330 declaration form. You are legally
S (secondary) code by using either the SH required to use the no-declaration rate where
(secondary high) or ST (secondary top) codes on the employee or person has failed to give you
their IR 330 tax code declaration. a completed IR 330. A completed IR 330
Using the correct secondary tax code will reduce declaration must include their:
the likelihood of a tax bill at the end of the year. ● name
● IRD number
Unlike the primary tax codes, an employee ● tax code.
can use the secondary tax codes on more than
one IR 330 at the same time. The rate you deduct is either:
● PAYE of 46.3 cents in the dollar (which
Example includes earners’ levy) for employees, or
Belinda has one full-time job and three ● 15 cents in the dollar on top of the normal
part-time jobs. She uses a primary tax code rate of withholding tax for persons receiving
for her full-time job and the S tax code for her withholding payments.
three part-time jobs.
For more information on withholding payments
see page 10.
If an employee works for you using a primary
tax code and also does different work for you If an employee doesn’t fill in an IR 330 form or
outside normal working hours, you would complete it fully, enter “ND” as the tax code on
generally add the payment for the unrelated your Employer monthly schedule (IR 348), and
work to the normal pay and calculate PAYE on tax their pay at the no-declaration rate.
the total payment.
This is how to calculate PAYE at the
However, where the unrelated work covers a no-declaration rate for salaries and wages.
different period from the normal pay period, or 1. Take gross earnings.
separate wage records are kept (eg, the work is 2. Add the value of taxable allowances, if any.
undertaken in a different department), use the 3. The total is “earnings subject to PAYE”.
secondary tax code. The employee must fill in a 4. Work out PAYE at the rate of 46.3 cents in
separate IR 330 if the secondary code is used. the dollar. Use whole dollars only.
Example
Basic weekly pay is $385.75. The tax on whole
dollars is $385 x 0.463
PAYE to be deducted is $178.258 EMPLOYER’S GUIDE
Responsibilities
If an employee has a Special tax code or deduction rate (IR 23) certificate
Some employees or other workers may have People who receive wages or withholding
circumstances which mean you may have to payments may apply to us for an IR 23
deduct tax at a special rate, or not deduct tax at certificate which authorises you to:
all. They’ll have a certificate that tells you the ● make PAYE deductions using a specified code
rate of deductions to make. If you don’t see a ● deduct tax at a certain rate
certificate, you must deduct the normal rate of ● deduct earners’ levy only, or
tax and other deductions. ● deduct student loan repayments at a specified
rate.
Note
If the IR 23 authorises you to deduct earners’
levy only (no PAYE deduction) the earners’
levy amount should be shown in the
“PAYE/withholding tax” column of your
employer monthly schedule.
IR 23
E
xa
February 2002
m
No. 5 32475
pl
Quote this number if you need
e
to discuss this certificate with us
O
Special tax code or deduction rate
n
ly
IRD number IRD number 0 1 5 9 1 1 8 6
Work and Income
NZ number Date of issue 1 9 M a r c h 2 007
Name and address of holder Employee’s name Matt Finnish
Employee’s address 15 Kakapo Cres
GREYMOUTH
Expiry date of certificate Valid from 0 1 0 4 2 0 0 7 to 3 1 0 3 2 0 0 8
Day Month Year Day Month Year
Name of employer. If more
than one employer, wording To:
Paula Royd Photographer
is “to whom it may concern”
You are authorised to make the following deductions from the earnings of the above employee:
PAYE deductions under tax code
Deduct at the rate indicated
with a “X” PAYE deductions at the rate of 23 cents in each dollar
of gross income
withholding tax deductions at the rate of cents in each
dollar of gross withholding income
earner levy deductions—multiply gross income by 0.013
Student loan deductions at the rate of cents in each
dollar of gross income.
Please keep this certificate with your employee’s wage records.
At expiry date, your employee must give you either a new certificate or a Tax code
declaration (IR 330) to use after that date.
This certificate is issued under the Income T
ax Act 1994, the Income Tax (Withholding Payments) Regulations 1979, the Accident
Rehabilitation and Compensation Insurance Act 1992, the Accident Insurance Act 1998, and the Student Loan Scheme Act 1992.
Signature
The certificate is invalid unless
it’s signed
Area Manager /Centre Manager 19 3 2007
Date
Must be signed by the holder Employee’s signature
Please sign this panel before handing
this form to your employer. It is an 26 3 2 007
offence to alter this certificate. Datewww.ird.govt.nz 9
Responsibilities
Checking the IR 23 If a student loan deduction rate is shown on the
When an employee gives you an IR 23, make IR 23, use this rate to calculate the student loan
sure it’s valid. Check that: deduction.
● the person named on the certificate is the As they have a special deduction rate for their
person working for you and the IRD number student loan, you don’t need to use the student
is the same as their IR 330 loan deduction column in the PAYE tables.
● it’s signed by an Inland Revenue manager Deduct PAYE using the M, S, SH or ST rates
● it’s for the current tax year shown in the tax tables, then add the student
● it shows the deduction rate loan deduction calculated.
● the employee has signed it
● the certificate shows the period it applies for. Example
When that period ends, the employee must show An employee’s IR 23 shows the following:
you a new IR 23 or complete a new IR 330 and
PAYE deductions under tax code M SL
select the appropriate code for their changed
circumstances. If you don’t have either of these, Student loan deductions at the rate of 15 cents
deduct tax at the no-declaration rate—see in each dollar of gross income
page 7.
Fortnightly gross earnings are $1,000.
Making deductions
Student loan to be deducted is $150
Calculate the tax by multiplying the employee’s
($1,000 x .15).
gross pay by PAYE at the special rate shown.
PAYE deducted (using the tax tables) $201.06
Example
An employee’s IR 23 shows the following:
PAYE deductions at the rate of 23 cents in each
dollar of gross income.
Earners’ levy deductions—multiply gross
income by 0.013
Gross earnings for pay period are $1,000.
Rate to deduct from employee’s wages is
23 + 1.3 = 24.3 cents.
PAYE to be deducted is $243.
($1,000 x .243 cents).10 EMPLOYER’S GUIDE
Responsibilities
What tax code goes on the Employer Don’t deduct tax from withholding payments
monthly schedule (IR 348)? made:
● If the IR 23 shows a special rate for PAYE ● to a company (except a company that is
deductions, show “STC” in the tax code box a non-resident contractor or non-resident
on your Employer monthly schedule (IR 348). entertainer or involved in agriculture,
● If the IR 23 shows a special deduction rate horticulture or viticulture)
for student loans, use the tax code shown on ● to a non-resident contractor who is eligible
the IR 23 on your IR 348. This code should for total relief from tax through a double tax
be M SL, S SL, SH SL or ST SL. agreement, and is present in New Zealand
● If the IR 23 shows a special rate for PAYE for a total of 92 days or less in any 12-month
deductions and student loans, show “STC” period
in the tax code box on your IR 348. ● to or for the contract activities of a non-
● If the IR 23 shows a special rate for resident contractor who has been paid
withholding tax deductions, show “WT” on $15,000 or less in total from all payers in any
your IR 348. 12-month period
● for work or services completed by a public,
Withholding payments local or Mäori authority
Withholding payments are payments made to ● to a holder of a current certificate of
people who are not employees but who are exemption.
employed on a contract-for-service basis—see
page 5 for information to help you work out A worker who is GST-registered will charge GST
who is an employee. These activities are taxed on goods and services supplied. This means the
at a flat rate of withholding tax. worker’s gross earnings will increase by the GST
charged.
The main activities and the tax rate for each are
listed on the back of the IR 330. If you’re paying If the worker gives you a tax invoice, work out
someone to do one of the types of work listed you and deduct withholding tax on the amount,
must deduct withholding tax from the payments. excluding GST.
Withholding tax is deducted even if the worker is
Example
registered for GST. The only exception is if they
provide you with a Certificate of exemption You receive a tax invoice showing:
(IR 331)—see page 11. Cost $500.00
Some types of withholding payments—such as plus GST $ 62.50
commissions, directors’ fees and payments to GST-inclusive amount $562.50
non-resident contractors—are covered in more
detail in Part 5. less withholding tax
(20% of $500) $100.00
If the type of work you’ve hired your contractor
to do isn’t listed on the back of the IR 330 you Net payment $462.50
don’t need to ask them to complete an IR 330 You would deduct withholding tax from the
or deduct withholding tax from payments you $500 and show the $500 as the gross payment
make to them. on the Employer monthly schedule (IR 348).
Note Show a WT tax code when completing the
IR 348 for a withholding payment recipient.
Don’t deduct earners’ levy, KiwiSaver
deductions or student loan repayments
from withholding payments. In these
circumstances this is the worker’s
responsibility, not yours.www.ird.govt.nz 11
Responsibilities
If a worker has a Certificate of ACC earners’ levy
All employees must pay an ACC earners’ levy
exemption (IR 331) to cover the cost of non–work-related injuries.
People who are in business for themselves, and We collect this on behalf of the Accident
who are subject to withholding tax, can apply to Compensation Corporation (ACC).
us for a certificate of exemption.
For employees, this levy has been built into the
A certificate of exemption may also be held by PAYE deduction tables and is deducted along
a non-resident contractor undertaking contract with the tax. This means you don’t need to do
activity in New Zealand. See page 49 for further any extra calculations for it in each pay period.
information.
Almost all earnings subject to PAYE are liable for
If a worker has a certificate of exemption, the levy. They include:
you can make payments without deducting
● wages and salaries
withholding tax. It cannot be used to exempt
● overtime pay
an employee’s salary or wages from PAYE
● backpay and holiday pay
deductions.
● long-service leave pay
Checking the IR 331 ● bonuses or gratuities
When you are shown a certificate of exemption, ● taxable allowances
you must check that it is valid and current. ● shareholder-employee salaries that has PAYE
deducted
If the certificate is valid, don’t deduct withholding ● salaries to partners in a partnership.
tax from payments you make to them.
The main exceptions are withholding payments,
If the certificate is not valid or current, the retirement payments, redundancy payments, jury
worker must complete an IR 330 tax code fees, witness fees, taxable and non-taxable
declaration. You must deduct withholding tax pensions, and tax-free allowances.
from payments you make.
ACC will invoice close company employers
You don’t need to include tax-exempt payments for earners’ levy on shareholder-employee
on your Employer monthly schedule (IR 348). remuneration that doesn’t have PAYE deducted.
However, you must keep a record of these The levy will be based on the shareholder-
payments. employee remuneration declared in the
It’s a good idea to keep a record of the certificate company’s IR 4 income tax return.
number, in case we review your records. This
number is on the bottom right-hand corner of
the certificate.12 EMPLOYER’S GUIDE
Responsibilities
KiwiSaver the amount of PAYE and student loan deductions
to be made.
You must make KiwiSaver available to
all employees (unless you’ve received an Employers then have to deduct the loan
exemption). repayments from their wages and pay the
deductions to us with the PAYE deductions.
As an employer you’re required to:
● check whether new employees are eligible to If they tell you part-way through the year that
join KiwiSaver they should have been using one of the student
● check whether new employees should be loan codes, deduct the repayments only from
automatically enrolled the time you get the new code. It’s not your
● give the KiwiSaver employee information responsibility to deduct repayments if they
pack (KS 3) to: haven’t given you the correct code.
– new employees who qualify for automatic
You’ll need to keep records of PAYE and student
enrolment, and
loan repayments separately.
– existing employees who want to opt in
● provide information to us about: By law, you cannot discriminate in any way
– all new employees who qualify for against any employee because of their student
automatic enrolment, and loan responsibilities—see page 45 for more
– eligible employees who want to opt in to details.
KiwiSaver
● provide new employees with a written Note
statement if you have an employer-chosen
Don’t deduct student loan repayments from
scheme, and also that scheme’s investment
withholding payments (see page 10).
statement
Note
For more information please read our
Child support deductions
KiwiSaver employer guide (KS 4) available at Inland Revenue Child Support assesses and
www.ird.govt.nz or from INFOexpress. collects child support from parents who don’t
live with their children.
The payments we collect are paid directly to the
Student loan deductions parent who has care of the child, if that parent
Students taking out loans under the student loan is not a beneficiary. If they are a beneficiary, the
scheme only have to make repayments if they payments are passed on to the government.
earn over a certain amount, called the repayment Employees can choose how they want to
threshold. pay their child support. It may be a private
When they expect to earn over the repayment arrangement that doesn’t involve the employer.
threshold from primary employment, they must However, if we ask you to deduct child support
tell their employers to start deducting loan from any employee’s wages, you’re required to
repayments. do this by law.
They do this by selecting an M SL tax code for We work out how much child support a paying
primary employment, or an S SL, SH SL or parent should pay from each pay. If the parent
ST SL tax code for secondary employment, on is your employee, we may contact you for some
their IR 330. information. This will usually be details about
how often you pay wages, the next regular
The PAYE deduction tables have columns for the payday or pay period for that employee, and
M SL, S SL, SH SL and ST SL codes, which show whether you want an employee reference on the
notice we send you.www.ird.govt.nz 13
Responsibilities
Child support deduction notice Where possible, all child support notices issued
Once we have all the information, we’ll send for the same pay will be in one envelope. We
you a child support deduction notice. This tells will issue an individual notice for each employee
you to deduct child support payments from your you make deductions for. However, you may
employee’s pay. wish to receive notices in one of the following:
● a consolidated deduction notice—a notice
The notice shows:
in schedule form showing all additions
● your employee’s name and IRD number and changes to child support payments for
● the payday or pay period when you must multiple employees, or
start deducting child support ● both individual deduction notices and a
● the amount to deduct from each pay consolidated deduction notice.
● employee reference, if provided. Please call us on our freephone number for
Don’t make any deductions before the start date child support employers if you would like to
on the notice. use either of the above options. You can call
0800 220 222 between 8 am and 5 pm Monday
If a payday is specified on the notice and it’s to Friday.
different to your actual payday you need to
contact us so we can change our records.
Similarly, if a pay period is specified that is
different to your actual pay period please
contact us.
It’s important the deductions shown on your
Employer monthly schedule (IR 348) match the
amount we expect to receive from the employee.
If the payday or pay period on the notice is
incorrect, these amounts may not match and
your employee may be charged unnecessary late
payment penalties.
If the deductible amount changes during the year,
we’ll send you another child support deduction
notice. This will show the new amount of child
support and when you must start deducting it.
Child support has priority over any other
deductions from an employee’s net pay. This
means that after you have deducted PAYE, you
must deduct child support before you deduct
anything else (such as student loan repayments,
insurances, KiwiSaver and other superannuation
deductions, or union fees).
We might ask you to deduct child support
from payments to someone who is not your
employee—eg, a contractor or a commission
agent. The notice we send you explains how to
make and pay the deductions.14 EMPLOYER’S GUIDE
Responsibilities
Protected net earnings Paying child support deductions
All employees must be allowed to keep 60% of Child support deducted in one month is due by
their net (after tax) pay, after child support is the 20th of the following month.
deducted. This is the employee’s “protected net
Show the total child support deducted for the
earnings”, to cover their living expenses.
period on the Employer deductions (IR 345)
Protected net earnings applies to child support or (IR 346) form. You also need to show the
only. So you must still deduct other deductions amount deducted on the Employer monthly
such as student loan repayments, KiwiSaver schedule (IR 348). See pages 23 to 28 for
deductions, insurances, superannuation and instructions on completing these forms. You
union fees from the protected net earnings. must keep records of child support deducted
along with your normal wage records.
Protected earnings are usually only affected if
your employee receives less pay than usual for Large employers have the option of paying child
some reason. If you’re asked to deduct more support once a month on the 20th or twice
than 40% of your employee’s net pay, you must monthly on the 5th and the 20th along with
not deduct the full amount of child support. other tax deductions.
If you don’t deduct the full amount of child
It’s important that the IR 348 shows all
support, don’t make up the difference from
deductions made in the month, no matter
future pays. We’ll make arrangements with the
whether you pay it to us monthly or twice-
employee to pay the balance owing.
monthly.
Example 1 – Full wages paid Employee privacy and prejudice
John is liable for payments of $70 child The law requires you to protect the privacy of
support each week. your employees who pay child support. You
John’s weekly wage $ 420.00 can’t give out information about their child
PAYE deductions $ 82.27 support responsibilities (with two exceptions—
page 45).
Net pay $ 337.73
40% of $337.73 is $ 135.09 By law, you cannot discriminate in any way
against any employee because of their child
Because $70 is less than 40% of John’s net support obligations. It’s very important that you
pay ($135.09) the full amount of child read the full statements about privacy, prejudice
support can be deducted. and penalties on page 45.
Example 2 – Less than full wages
Deducting employees’ arrears
John has had three days leave without pay
Sometimes, we’re unsuccessful in our attempts to
in a week.
obtain payment from your employee(s) and may
John’s reduced wage $ 168.00 need your assistance. We may send you a notice
PAYE deductions $ 27.21 requiring you to deduct tax or student loan
Net pay $ 140.79 arrears from an employee’s wages. You must
40% of $140.79 is $ 56.32 deduct any child support payments before tax
or student loan arrears. Pay the arrears to us by
Because $70 is more than 40% of John’s net the end of each calendar month, separately from
pay ($56.32) the full amount of child support PAYE deductions.
cannot be deducted, otherwise John would be
left with less than 60% of his net pay. Any Don’t use an Employer deductions (IR 345) or
other deductions, eg student loan deductions (IR 346) to pay the arrears. Instead, attach a
would still have to be taken out of John’s copy of the deduction notice with your payment.
remaining pay.www.ird.govt.nz 15
Responsibilities
For more help
Superannuation fund To check whether your fund is liable for SSCWT,
contributions contact your fund manager.
A superannuation fund is a scheme that
Specified superannuation contribution
has been registered under the Superannuation
withholding tax
Schemes Act 1989.
An employer is required to make a deduction
A specified superannuation contribution is of specified superannuation contribution
any contribution to a superannuation fund an withholding tax (SSCWT) when making any
employer makes for the employees’ benefit. specified superannuation contribution. If an
If your employees ask you to make deductions employer fails to make a deduction as required,
from their wages and pay them to a the SSCWT is worked out on the grossed-up
superannuation scheme, these are not specified amount of the specified superannuation
superannuation contributions. contribution. To calculate the withholding tax,
use the formula:
Note a
SSCWT = x b
Employer contributions to KiwiSaver are 1–a
exempt from specified superannuation
Where: a is the rate of SSCWT, and
contribution withholding tax (SSCWT), up
b is the actual amount paid to the fund.
to a maximum of 4% of the employee’s gross
salary or wages. Employer contributions to The grossed-up contribution is then:
other complying superannuation funds are ● the actual amount paid to the fund, plus
also exempt from SSCWT.
● the amount of SSCWT worked out using the
formula.
If your superannuation fund is not a KiwiSaver
scheme or a complying superannuation fund,
any contribution an employer makes to a Example
superannuation fund for the benefit of an An employer made a contribution of $1,000
employee is liable for SSCWT. to a superannuation fund. The amount of
SSCWT to be paid is (using the formula):
The contribution is:
● taxed at the withholding rate of 33 cents in SSCWT = 0.33 x $1,000 = $492.53
the dollar (SSCWT), or 0.67
● taxed at the optional SSCWT rate of The gross superannuation contribution is:
39 cents in the dollar (see page 16) if the
The amount received by the
employee and the employer agree, or
superannuation fund $1,000.00
● taxed at an SSCWT rate based on the annual
Plus the withholding tax on
salary or wages paid to the employee in
that amount $ 492.53
the previous standard tax year, 1 April
to 31 March. When employees have not Grossed-up contribution $1,492.53
worked for the previous year, an annualised
Withholding tax on $1,492.53 at 33 cents
estimate based on the salary or wages they
in the dollar is $492.53. This is the tax on
have received or will receive, can be used.
the grossed-up contribution. The SSCWT is
This option is voluntary and at the discretion
deducted from the grossed-up contribution.
of the employer (see page 16) or,
● treated as salary or wages of the employee
Note
and taxed at the employee’s personal tax
rate, if the employer and the employee agree The above formula and example assumes that
(see page 16). no amount of SSCWT has already been paid
for the contribution.16 EMPLOYER’S GUIDE
Responsibilities
Optional SSCWT rate – 39 cents in the Where the employee didn’t work for the
dollar employer for all of the previous standard tax
Employees can choose (with the approval of year, the employer can estimate the amount
their employer) to have SSCWT deducted at the of salary or wages that will be earned by the
higher rate of 39%. Only employees who earn employee in the year ahead, and base the
over $60,000 a year are likely to request the SSCWT rate on the estimate.
higher rate to avoid withdrawal tax (see page 17 Paying SSCWT
for details).
Pay any SSCWT deducted with your PAYE
SSCWT rate based on employee salary or deductions by the due date.
wages
You must let us know if you’re paying SSCWT,
Employers can offer their employees an SSCWT so we can send you an Employer deductions
rate based on the employee’s salary or wages (IR 346) form to return with your payments
received in the previous standard tax year, ie (see page 23). Enter the amount of SSCWT
1 April to 31 March. This option is beneficial to deducted for the period in Box 8 on the IR 346.
employees who earn less than $38,000. If you need one, contact us—see page 55.
The employer must determine the rate at the Taxing contributions at the employee’s
beginning of the standard tax year the specified personal tax rate
superannuation contributions relate to. Where
If employers agree, employees can choose to
the employee’s salary or wages in the previous
have all or part of the value of the employer
standard tax year was:
superannuation contribution included in their
● under $11,400, their SSCWT rate would be gross salary and wages and taxed at their
15 cents in the dollar personal tax rates. This will benefit employees
● more than $11,400 and not more than whose tax rate is less than 33%. Employees
$45,600, their SSCWT rate would be must understand that classifying this amount as
21 cents in the dollar salary and wages will affect their Working for
● more than $45,600, their SSCWT rate would Families Tax Credits entitlement, the amount
be 33 cents in the dollar. of child support they pay and their student loan
repayments. However, they can change back at
Example any time.
Regan’s Trucks Ltd employs John and makes The actual employer contribution is paid into
specified superannuation contributions on his the superannuation fund—the employee doesn’t
behalf. John worked at Regan’s Trucks Ltd receive the contribution in the hand. The value
for the full year 1 April 2006 to 31 March of the employer contribution will be added to
2007. He received a salary during that year the employee’s gross wages for the pay period
of $36,400. For the 2008 tax year Regan’s and taxed at the appropriate rate using the PAYE
Trucks Ltd have elected to tax the specified deduction tables. The rate will depend on the
superannuation contributions using a rate employee’s tax code.
based on John’s previous year’s salary. As
his salary was less than $45,600, the SSCWT Contributions treated as salary and wages are
rate is 21 cents in the dollar. The SSCWT to subject to earners’ levy (included in the PAYE
be deducted from each employer contribution deduction tables).
made during the 2008 tax year is 21 cents in
the dollar.www.ird.govt.nz 17
Responsibilities
Withdrawal tax ● Withdrawals on partial retirement are
exempt (partial retirement means if all
This tax applies to employer contributions
employer and employee contributions to a
withdrawn from a superannuation fund, but not
superannuation fund cease). If a member of
to contributions made by employees, as long
a fund reduces their working hours to less
as the trustee of the superannuation fund can
than 30 hours a week as a lead-in to full
identify these separately.
retirement, they may make a withdrawal with
If you make contributions to a superannuation no tax applying. The member must provide
fund on behalf of your employees, you may have written notification that they don’t intend
to provide information to the superannuation to increase their hours of paid employment
fund about any of your current or past in the future. The written notice also needs
employees. So if a withdrawal is made, the a statement from the member’s employer(s)
correct amount of withdrawal tax can be that there is no agreement that work hours
determined. The information requested by will increase.
the superannuation fund could relate to an ● The withdrawal tax doesn’t apply when
employee’s period of employment, income details funds are withdrawn after the employee
and superannuation contribution details. You ceases employment (an exception to this may
need to be able to provide this information. apply if the employee started within the last
two years, or if the employer contributions
Withdrawal tax exemptions where you may
to superannuation savings have increased by
be required to give information
50% or more in either of the last two years).
The withdrawal tax has a number of Ceasing employment doesn’t include an
exemptions. In some cases, you’ll need to employee transferring from one employer
give information about an employee to a to another, related employer (employers are
superannuation fund to let the fund determine related if they are separate employers but one
whether an exemption applies. Exemptions that is a branch or division of the other, or if they
may require information include: are associated).
● Contributions to a superannuation fund ● The tax doesn’t apply if withdrawals are
made before 1 April 2000, and contributions used to purchase a life annuity or pension,
that continue at the same level as that of the or an annuity or pension to be paid over 10
last pay period ending before 1 April 2000, or more years. Withdrawals made to meet
are not subject to the withdrawal tax. fund administration costs and the costs of
● If an increase in an employer’s contributions group and individual life, health, sickness or
is required by a trust deed of the accident insurance on behalf of members are
superannuation fund, if a contract exists also exempt.
before 1 April 2000, or if an employee’s
salary increases and their percentage of Other exemptions
contribution from employers remains the Where it can be proved that significant financial
same, the contributions aren’t subject to hardship exists, the tax will not apply. The fund
withdrawal tax. You need to make sure you has been provided with a list of events that may
have kept sufficient records, including the give rise to serious financial hardship.
basis of any pay increase and whether that
Withdrawal tax doesn’t apply to withdrawals
increase was over 50%.
necessary to settle the division of relationship
property.
Withdrawal tax doesn’t apply to any amount
withdrawn that has been subject to the optional
39% SSCWT rate.18 EMPLOYER’S GUIDE
Responsibilities
Reducing withdrawal tax
The withdrawal tax is reduced by 25% for each
of the four income years prior to the year the
withdrawal is made, as long as the employee’s
taxable income and the employer specified
superannuation contributions are less than
$60,000 for each year. This means that if the
$60,000 threshold is not exceeded in all the
previous four years, no withdrawal tax applies
at all.
Note
Withdrawal tax doesn’t apply where an
employee’s gross annual earnings for each of
the previous four years are less than $60,000
and SSCWT of 33% has been deducted.www.ird.govt.nz 19
Part 2 – Record keeping and making payments
Records you need to keep PAYE intermediaries:
You must keep all wage records for at least seven ● Calculate the employer’s respective payroll
years, including all paysheets and PAYE payment information.
receipts. Your records must be in English, unless ● Pay the employer’s respective employees,
you’ve asked us for approval to use another including payment of any third party
and payments
language. deductions.
Records
To help with your record keeping, you can get ● Pay the employer’s respective tax deductions
specially designed wagebooks or computer (including student loans, KiwiSaver, child
payroll packages. support, SSCWT and additional employee-
related deductions) to us.
Note ● Meet all the employer record keeping and
If you have a computer payroll system you return filing requirements.
must keep the same records as for a manual Providing an employer has supplied the
one. You may keep your records stored on intermediary with all their relevant payroll
CDRom or USB key, but you must be able to information and gross payments, the
print them out if we ask you to. You must responsibility for applying the PAYE rules
keep all business records for seven years. correctly will rest with the intermediary and not
the employer.
PAYE intermediaries
Employers can hire a PAYE intermediary to
complete their payroll requirements. If a
PAYE intermediary is used, both the employer
and the intermediary must meet the following
requirements.
Employers need to:
● Provide information requested by the
intermediary within the time agreed by the
employer and intermediary.
● Pay employees gross salary or wages for the
pay period into a trust account established by
the PAYE intermediary by the date specified
by the intermediary.
● Keep records of the gross salary or wages
paid for the period.
Note
The government subsidise or partly subsidise
the cost of using a payroll intermediary. The
subsidy is available to small employers and
for up to five employees per month. To
get the subsidy you must use a listed PAYE
intermediary. The listed PAYE intermediary
will receive the subsidy provided certain
conditions are met.20 EMPLOYER’S GUIDE
Manual record keeping ● Keep a summary that shows the following
totals for each deduction period:
Get into a routine:
– gross wages
● Start a new page in your wagebook as soon – PAYE deductions
as an employee starts work with you or at the – child support deductions
beginning of each tax year. Make sure they – student loan deductions
give you the personal details you need. – KiwiSaver deductions
● Keep a separate page for each employee, even – SSCWT.
and payments
if they were only employed for one day.
The information in your wagebook will help you
Records
● Complete all these wage details each payday:
fill in each IR 345 or IR 346 form (see page 23),
– total gross earnings, including taxable
and the Employer monthly schedule (IR 348)
allowances (the amount before PAYE is
(see page 25).
deducted)
– the amount of PAYE deductions Note
– any child support deductions
– any KiwiSaver deductions When completing the Employer monthly
– any student loan deductions schedule (IR 348) it doesn’t matter when a
– any SSCWT (see page 15) pay period starts or ends. Only include those
– the value of tax-free reimbursing deductions from gross earnings actually paid
allowances. or credited to employees during the period
covered by the schedule.
● Summarise the details for each employee at
the end of each deduction payment period.
This will be either twice-monthly or monthly,
depending on whether you are a large or small
employer—see page 21.
Your employee gives you this code on
Start a new page for each employee the Tax code declaration (IR 330)
Wagebook
(a) Name Timote Paraone 92 - 1 2 3 - 4 5 6
(b) Address 890 Adelaide St, Petone M SL Date applied 14 / 12/ 2006
(c) Occupation Builder Annual holidays Start date Finish date
(d) Date started 14 December 2006
Week Gross pay PAYE calculated Child support deductions Student loan deductions KiwiSaver deductions Net after
Total tax and Non taxable Net pay
ending For week For month For week For month For week For month For week For month For week For month deduction deduction allowances to worker
6/7/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
13/7/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
20/7/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
27/7/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
July 07 2,400 00 491 32 103 20 96 00 690 52 1,709 48 1,709 48
3/8/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
10/8/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
17/8/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
24/8/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
31/8/07 600 00 62 83
122 85 25 80 24 00 172 63 427 37 427 37
August 07 3,000 00 614 15 129 00 120 00 863 15 2,136 85 2,136 85
Copy monthly totals to the summary
Monthly summary of wages and tax deductions For month ending 31 August 2007
PAYE Child support Student loan KiwiSaver Total Net after tax Non taxable Net pay to
Gross pay calculated deductions deductions deductions deductions and deductions allowances employee
Ross Davies (12-173-142) 1,540 00 295 53 295 53 1,244 47 1,244 47
Tim Paraone (92-123-456) 3,000 00 614 15 129 00 120 00 863 15 2,136 85 2,136 85
4,540 00 909 68 129 00 120 00 1,158 68 3,381 32 3,381 32www.ird.govt.nz 21
Paying deductions to Inland New employers become a large employer if their
gross annual PAYE and SSCWT deductions go
Revenue over $100,000 in the first year of employing.
If the PAYE deduction due date for payment falls
on a Saturday, Sunday, or public holiday, you Large employers must pay the deductions:
can make your payment on the next working ● from wages paid between the 1st and 15th of
day without penalty. the month by the 20th of the same month
Large employers pay their PAYE and other ● from wages paid between the 16th and the
and payments
deductions twice-monthly. Small employers pay end of the month by the 5th of the following
Records
once a month. Whether you are a large or small month, except for the second period of
employer depends on your gross annual PAYE December, which is due on 15 January.
deductions. Gross annual PAYE deductions are
the total PAYE deductions made, including any Period PAYE deducted Due date
SSCWT deductions, but excluding earners’ levy, 1 to 15 July 2007 20 July 2007
student loan repayments, KiwiSaver deductions
and child support. 16 to 31 July 2007 5 August 2007
We send you an Employer deductions (IR 345) 1 to 15 August 2007 20 August 2007
or (IR 346) form before the due date for each
16 to 31 August 2007 5 September 2007
payment. Fill in this form with the details for
the period, and send it with your payment. See
page 23 for more information about these forms. Any payments not received by the due date will
be liable for a late payment penalty and interest
Employers who file manual returns will also (see page 43).
receive an Employer monthly schedule (IR 348)
each month—see page 25 for more information. Note
Are you a small employer? In deciding whether you’re a large employer,
If your gross annual PAYE and specified we treat the following as one employer
superannuation contribution withholding tax ● any companies in a group that have 66%
(SSCWT) deductions are less than $100,000 or more common ownership
you’re a “small” employer. You must pay PAYE ● all partners in a partnership
monthly. PAYE deducted in one month is due by
● all persons who have control of the same
the 20th of the following month.
property, such as
– a deceased person’s estate, or
Example
– a company in liquidation.
An employer pays wages fortnightly on
Thursdays.
Are you a new employer?
Period PAYE deducted Due date If your gross annual PAYE deductions go over
August 2007 (two paydays) $100,000 at any time during the first year of
9 and 23 August 2007 20 September 2007 employing we’ll send IR 345 (or IR 346) forms
so you can pay twice-monthly. You’ll also need
to register for electronic filing (ir-File)—see page
Are you a large employer? 31 for more information.
If your gross annual PAYE and SSCWT
deductions were $100,000 or more in the
previous year ended 31 March, you’re a
“large” employer.22 EMPLOYER’S GUIDE
Large employers with other pay Salary and wages paid irregularly
periods The due date for paying the deductions depends
on the date you pay wages.
In all the following situations, the due dates are:
● the 20th of the month in which the deductions Remember, if you don’t pay wages in any period,
were made (for deductions made between the you must still file a nil Employer deductions
1st and the 15th of the month) (IR 345) or (IR 346) form, and Employer
monthly schedule (IR 348) (see page 23).
● the 5th of the month following the month the
and payments
deductions were made (for deductions made
Records
between the 16th and the end of the month),
except for the second period of December,
which is due on 15 January.
Salary and wages paid once a month on the
same day each month
On request, we can send only one Employer
deductions (IR 345) or (IR 346) form per
month. The due date depends on the date of
deduction.
Salary and wages paid every four weeks
Generally, deductions have to be paid once a
month. However, there may be occasions when
deductions are paid twice a month. This is
because the payday falls on a different day each
month.
Example
Date wages paid PAYE period ending Due date
10 September 2007 15 September 2007 20 September 2007
8 October 2007 15 October 2007 20 October 2007
5 November 2007 15 November 2007 20 November 2007
Salary and wages paid every three weeks
Deductions may have to be paid once or twice
a month, depending on which day in the month
the payday falls.
Example
Date wages paid PAYE period ending Due date
3 September 2007 15 September 2007 20 September 2007
24 September 2007 30 September 2007 5 October 2007
15 October 2007 15 October 2007 20 October 2007
5 November 2007 15 November 2007 20 November 2007www.ird.govt.nz 23
Employer deductions forms Total deductions payable (Box 7)
(IR 345 and IR 346) Add up all the deductions made during the
period and show this figure in Box 7. This is the
We send you an IR 345 form before you have to
amount to pay us.
make each payment. This is for you to record
the deduction details and send them with your “Nil” IR 345 or IR 346
payment. If you’re registered with us as a payer
If you don’t pay salary or wages in any period,
of SSCWT, you receive an IR 346 form instead.
send in a nil IR 345 or IR 346. If you don’t send
and payments
Read these notes about the IR 345, as they also
one in, we’ll ask you to explain why you haven’t
Records
apply to the IR 346. The IR 346 has one extra
made a payment. Also send in any IR 348
box for entering the SSCWT deductions.
schedules with preprinted details.
Fill in the details on the IR 345 and send it to us
Complete the IR 345 or IR 346 showing the
with your payment.
period no PAYE was deducted and enter 0.00
If you’re paying your PAYE electronically (see in Boxes 7 and 8. Sign it and send it to us in
page 31) you must still complete the Employer the envelope provided, along with any IR 348
deductions (IR 345) or (IR 346) forms you can schedules.
do this electronically using ir-File – see page 31.
If you have ceased employing please refer to
If you don’t receive an IR 345 or IR 346 in time, page 32.
you must still make your payment. Send a note
with your payment that shows the IR 345 or Completing the IR 346
IR 346 details as well as your name and IRD If our records show you pay SSCWT, we send
number. you an IR 346 form instead of an IR 345. The
difference between the deduction forms is that
Completing the IR 345 the IR 346 has two additional “Boxes”.
Enter the following details for the period covered
KiwiSaver employer contributions (Box 7)
by the IR 345.
Total the KiwiSaver contributions you have
PAYE deductions and withholding tax (Box 3) made to your employee’s KiwiSaver scheme.
Print the total PAYE deducted from your Enter this figure in Box 7.
employees’ gross earnings during the period.
SSCWT deductions (Box 8)
Also include withholding tax deductions in Total the SSCWT deductions you have made.
this box.
Enter this figure in Box 8 of the IR 346.
Child support deductions (Box 4)
Total the child support deductions made for all Note
employees for the period and enter the figure in
Remember, if you have made deductions for
Box 4.
employees’ arrears, don’t show these on your
Student loan deductions (Box 5) employer deduction forms IR 345 or IR 346.
Total the student loan deductions made for all Instead, attach a copy of the deduction
employees for the period and enter the figure in notice.
Box 5.
KiwiSaver deductions (Box 6)
Total the KiwiSaver deductions made for all
employees for the period and enter this figure in
Box 6.24 EMPLOYER’S GUIDE
Employer deductions IR 345
February 2007
For more information: website www.ird.govt.nz, telephone 0800 377 772, INFOexpress 0800 257 773
Please see notes on the back for help filling out this form and the IR 348 schedule.
Champion Car Repairs Ltd IRD number 1 11-476-829 These will be
5 Parkhill Drive preprinted
and payments
Tauranga Period ended 2 31 August 2007
Records
PAYE deductions
and withholding tax
3 2 55 3 7 7
Child support deductions 4
Student loan deductions 5 66 3 0
KiwiSaver
deductions
6 22 2 2 0
Your copy Total payable 7 2 84 2 2 7
Add Boxes 3, 4, 5, and 6.
Keep this top part for your records.
Tear off here. Send this part to Inland Revenue.
IR 345
Inland Revenue copy
Champion Car Repairs Ltd IRD number 1 11-476-829
5 Parkhill Drive
Tauranga Period ended 2 31 August 2007
PAYE deductions
OFFICE USE ONLY and withholding tax
3 2 55 3 7 7
Totals from
Operator Corresp. Payment Return Child support deductions 4 employer
code indicator attached Y cat.
monthly
Student loan deductions 5 66 3 0 schedule
KiwiSaver
deductions
6 22 2 2 0
This is the
Total payable 7
Declaration I declare that the information given Add Boxes 3, 4, 5, and 6. 2 842 2 7 amount to
in this return is true and correct. pay to Inland
Signature
Revenue
15 09 07 Has payment been made electronically? (Tick one) Yes No
Date
DED
Payment slip
Champion Car Repairs Ltd IRD number 11-476-829
5 Parkhill Drive Period ended 31 August 2007
Tauranga
Amount of 8
payment 2 84 2 2 7
This return and any payment are due Copy your total from Box 7 to Box 8 and include any late
payment penalties and interest, for this period only.
20 September 2007You can also read
