Payroll

PAYE changes for income earned by school students (effective 1 April 2013)

The tax credit for children has been repealed as part of the Government's Budget this year. This may change how you tax students.

Children who earn less than $2,340 for a tax year and have no tax deducted from their wages can continue to have no tax deducted until 31 March 2013. From 1 April 2013 they will need to complete a Tax Code Declaration (IR330) and give it to their employer so tax can be deducted from their wages.

If your employees file a return or request a personal tax summary they may be assessed as having tax to pay, as the tax credit already received will no longer be taken into account. If they think they need to file a return they can complete an IR330 now to change their tax code, so their employer can start deducting tax at the correct rate. This will help avoid or reduce any tax bill at the end of the year.

When your employee is under the age of 16, they are not automatically enrolled into KiwiSaver. If they choose to have KiwiSaver deductions, it is not compulsary for you as an employer to contribute.

For any queries regarding these changes, please contact Tracy Maslin

 

PAYE changes for income earned by Tertiary students and other staff

Any staff, including university, polytechnic or other tertiary students, must complete an IR330 and give it to you as an employer so you can deduct the correct PAYE or tax on schedular payments from their pay.

KiwiSaver

If you employ anyone on a temporary contract for less than 28 days you don't have to enroll them for KiwiSaver. If they're already KiwiSaver members and they want you to make KiwiSaver deductions they must give you a KiwiSaver deduction notice (KS2).

For any queries regarding these changes, please contact Tracy Maslin.  

 

Employment Agreements and 90 day trial periods

With effect from 1 July 2011 employers must retain a copy of individual employment agreements or individual terms and conditions of employment. A copy of any intended employment agreement must also be kept, even if the employee has not signed the intended agreement, or agreed to any of the terms and conditions. If requested, the employer must, as soon as reasonably practicable, provide the employee with a copy of the agreement. Penalties can be incurred for failure to comply.

An employee must be given their employment agreement with sufficient time to allow them to seek independent advice before employment commences.

90 day trial periods

Before 1 April 2011 the 90 day trial period could only be used if the employer had fewer than 20 employees. From 1 April 2011 the employee limit has been removed, so that all employers may use a 90 day trial period provision providing certain conditions are met.

Employers looking to use the trial period should note the following;

  1. The trial agreement is for new employees (i.e. there must be no previous employment history with the employer).
  2. If you make an offer of employment to an employee, then the proposed employment agreement containing the trial period should be given to the employee as part of the employment offer. Best practice is to make the offer conditional upon your new employee signing the proposed employment agreement with the trial period.
  3. You must give the prospective employees a reasonable opportunity to seek independent legal advice about the terms of the employment offer (including the trial period) before signing the employment agreement.
  4. Employees MUST sign the employment agreement containing a compliant trial provision before starting work.
  5. If the employment agreement with the trial period is not signed before the employee starts work then the trial period is null and void.

For any queries regarding these changes, please contact Tracy Maslin.  

 

KiwiSaver changes for employers

Recent legislation changes have increased the minimum KiwiSaver contribution rates from 1 April 2013.

If you or your clients have employees who are contributing at 2% prior to 1 April 2013, you or your clients must change the:

  • Employee contribution rate to 3%.
  • Compulsary employer contribution to 3% for all eligible employees.

These changes must be made for the first full pay period commencing on or after 1 April 2013. If you or your clients make voluntary employer contributions, please make sure your total contributions are at least 3% from this date.

Remember, ESCT (Employer Superannuation Contribution Tax) must be deducted from all employer contributions.

Employees

The KiwiSaver rates change from the first full pay period commencing on or after 1 April 2013. If your employees are contributing the minimum 2% , the rate will need to change to 3%. They can still select a higher employee contribution rate of 4% or 8%.

Employers

There will be situations where an employee's pay will fall in-between these two tax years. You must make compulsory employer contributions at the rate that applies for the required tax year when the pay period starts: 

  • The rate is 2% from the first full pay period starting on or after 1 April 2009 up to and including 31 March 2013.
  • The rate will change to 3% from the first full pay period starting on or after 1 April 2013.

For any queries regarding these changes, please contact Tracy Maslin.  

 

Employer Superannuation Contribution Tax (ESCT)

ESCT is the tax deducted from cash contributions an employer makes to an employee's retirement fund, i.e. KiwiSaver Schemes, complying funds and other superannuation funds.

The 2% exemption from ESCT was removed from 1 April 2012. If you're contributing to a KiwiSaver scheme or a complying fund, all your contributions will be liable for ESCT.

Calculation options

ESCT is calculated differently from 1 April 2012. Unless you're paying contributions to a defined benefit fund, you won't be able to use the 33% flat rate option. Instead, you'll calculate ESCT at the employee's marginal ESCT rate. 

 

ESCT rate threshold amount
Tax rate
$0 - $16,800 0.105 (10.5%)
$16,801 - $57,600 0.175 (17.5%)
$57,601 - $84,000 0.300 (30%)
$84,001 and above 0.330 (33%

 

The other option is to treat your employer contributions as salary or wages and tax your employee through PAYE (with their agreement).

If you calculate this incorrectly or do not pay it,  the IRD may deduct the amount owed from another tax type.

You can also read about the changes online at www.ird.govt.nz/changes

For any queries regarding these changes, please contact Tracy Maslin.  

 

Minimum wage rises

The minimum wage rose by 25c to $13.75, effective on the 1 April 2013.

The training and new entrants' minimum wage increased from $10.80 to $11.80 (80% of the adult minimum wage).

For any queries regarding these changes, please contact Tracy Maslin.  

 

Starting-out wage - introduced 1 May 2013

The starting-out wage applies to starting-out workers and replaces the new entrants' wage. The new entrants' wage will no longer be an option for new employees. However, those employers who were paying an employee the new entrants' rate (or any rate greater than the new entrants' rate but less than the adult minimum wage rate) on 30 April 2013 may continue to do so until that employee has completed 200 hours or 3 months of employment (whichever is completed first). After that point the employee must be paid the adult minimum wage.

16 to 19 year old trainees who were entitled to be paid the training minimum wage before 1 May 2013 will now be entitled to be paid the starting-out wage, however these rates are the same and so in practice these employees will continue to be entitled to the same minimum wage.

For any queries regarding these changes, please contact Tracy Maslin.

 

Tax treatment when cashing in annual holidays

Under the Holidays Act 2003 employees are able to "cash in" up to one week of their annual leave entitlement.

If an employee and employer agree to cash in a weeks annual leave, it should be treated as an extra pay or unexpected bonus. As this is taxable income PAYE should be calculated using the rates for extra pays. The employee may need to check the correct amount of PAYE has been withheld over the tax year. 

An employee's child support liabilities and Working for Families Tax Credit entitlements may also need to be adjusted if their family income has changed.

For any queries regarding these changes, please contact Tracy Maslin