Is your business taking on its first employee?
You need to register with Inland Revenue Department (IRD) as soon as your first employee starts work. Go to www.ird.govt.nz and click through the path ‘Get it done online/Employers (payroll)/Register as an employer’.
We will then send you a ‘new employer pack’ with more information about your responsibilities.
Class your workers correctly. Is your worker an employee or an independent contractor? It is important to know the difference.
Some employers class a worker as an independent contractor, when the worker is in fact an employee. There may be significant penalties if you get it wrong. Please check with us, or your tax advisor, if you are in doubt.
Our guide, ‘Self-employed or an employee?’ (IR336) has more information.
If you are hiring an independent contractor, please visit our website for appropriate information.
All new employees must fill a Tax code declaration (IR330) form. You must refer to the employee’s tax code when you calculate their deductions.
Employee deductions
On payday, you must deduct from the employee’s gross wage, send the deductions to IRD by the due date and pay the net amount to the employee.
The main deduction is PAYE, which consists of the employee’s income tax payment and their ACC earners’ levy. If your employee has a student loan, you may have to make deductions; the employee’s tax code will tell you if this is necessary.
Child support and KiwiSaver deductions may be necessary too. Ensure that you are deducting the right amount.
Our PAYE/KiwiSaver calculator makes it easy. Visit our website and follow the path ‘Work it out/Pay as you earn (PAYE)/PAYE/KiwiSaver calculator.’
The calculator caters for all the deductions mentioned above.
If your worker has not given you a fully completed IR330, deductions must be made at the ‘no-notification rate.’
IRD deadlines
Pay the deductions to IRD by the due date.
How often you send us your deductions depends on the size of your payroll.
Employers with gross annual PAYE of less than $500,000 remit their deductions monthly. Deductions from wages paid during the month are due by the 20th of the following month.
Employers with gross annual PAYE of $500,000 or more pay their deductions twice a month. Deductions from wages paid between the 1st and 15th of the month are due by the 20th of the same month.
Deductions made between the 16th and the end of the month are due by the 5th of the following month.
Deductions for the second period of December are due by January 15).
Each time you pay your deductions to IRD, you must file an ‘Employer Deductions (IR345) Form.’
The form has the same due date as the payment.
File your Employer Monthly Schedule (IR348) on time every month
Once a month, you need to file an Employer Monthly Schedule (IR348) giving us details of your employees’ gross wages and the deductions made.
Employers with gross annual PAYE of less than $500,000 file their IR348 by the 20th of the month following the month the wages were paid.
Employers with gross annual PAYE of $500,000 or more file their IR348 by the 5th of the following month.
FBT liability
Account for any fringe benefit tax (FBT).
If you provide Fringe Benefits (perks) to employees, you may have to pay FBT.
Categories of Fringe Benefit include (a) the use of a motor vehicle (b) Low-interest loans (c) Free, subsidised, or discounted goods and services (d) Employer contributions to sick, accident or death benefit funds, some superannuation schemes, and specified insurance policies.
Maintaining records
Please keep records of all your activities as an employer. Records that must be retained include forms received from employees (like the IR330), wage books, bank statements, copies of returns (including your IR345s and IR348s), and your normal accounting records showing wages and deductions paid.
All records must be retained for at least seven years.
If you stop employing staff, please tell us. Then we can update our records and stop sending you employer-related materials.
Free Workshops
If you are in business, you may like to attend one of our free tax seminars or workshops held in various parts of the country.
Visit www.ird.govt.nz and enter the search term ‘Seminars.’
Abdul Rafik is Inland Revenue’s Community Relationships Advisor based in Auckland. He will answer your queries emailed to venkat@indiannewslink.co.nz
