Payroll News - 2004
Issue 61 March 2004
- New option for taxing specified superannuation contributions
- Certificates of exemption
- 2005 tax tables
- ACC earners' levy rate
- Late filing penalties
- Child support deduction notices
- Provisional tax due date
In this issue we talk about taxing specified superannuation contributions, changing the format of your child support deduction notices and we remind you about certificates of exemption and late filing penalties.
Please pass this newsletter on to the person who deals with the payroll in your business.
New option for taxing specified superannuation contributions
Contributions by employers to superannuation funds for the benefit of their employees are generally subject to specified superannuation contribution withholding tax (SSCWT) at a flat rate of 33%. This flat rate over-taxes the retirement savings of employees earning less than $38,000.
To prevent this happening, a new option will be available from 1 April 2004 for taxing specified superannuation contributions. This new option allows a lower tax rate to be applied for some employees.
How does it work?
The new option is voluntary and can be used at your discretion. If you choose to use it, the rate of SSCWT that should be deducted from contributions will be based on the annual salary or wages paid to your employee in the previous tax year. If an employee was not employed by you in the previous year, or for all of the previous year, you can estimate the total amount of salary or wages that they will earn in the year to come. You can then determine the appropriate SSCWT rate from that estimate.
Under this option the SSCWT rate for employees whose salary or wages in the previous income year totalled:
- less than $9,500, will be 15%
- more than $9,500 up to $38,000, will be 21%
- over $38,000, will be 33%.
You must calculate the rate of SSCWT to be deducted at the start of each year that contributions will be made.
There is no requirement for you to adjust the SSCWT rate during any year if an employee's salary or wage increases or decreases. If this is the case, a new rate will apply from the following year. If you do not choose to use this new option, please continue to use the existing options outlined in the Employer's Guide (IR335).
If you require any further information about this new option, please contact us on 0800 377 772. If you are a Corporates customer please call us on 0800 443 553.
Certificates of exemption
If you are making withholding payments to people who are self-employed, they are, generally, subject to withholding tax at a flat rate, depending on the type of work undertaken. The rates are listed on the back of the Tax code declaration (IR330) form and are also shown in the PAYE deduction tables.
However, you can make payments to them without deducting withholding tax if they show you a Certificate of exemption (IR331). You do not need to include these payments on your Employer monthly schedule (IR348), but you must keep a record of these payments. Please also keep a record of the certificate of exemption number, or a photocopy of the original in case we need to review your records.
Certificates of exemption are issued for one year and must be renewed by 1 April each year. People can apply online for a certificate of exemption or complete our Request for a certificate of exemption from withholding tax (IR332) form. They can get this from our website or by phoning INFOexpress on 0800 257 773.
Note: When you are shown a Certificate of exemption (IR331), please check that it is valid and current. The work shown on the certificate must be the same as the work the person is doing for you. If the certificate is not valid, the worker must complete a Tax code declaration (IR330) form and you must deduct withholding tax from payments you make to them.
The certificate cannot be used to exempt an employee's salary or wages from PAYE deductions.
2005 tax tables
We will soon begin posting out your PAYE deduction tables for the year ending 31 March 2005. The rates in these tables apply from 1 April 2004. Use these tables for pay periods ending on or after 1 April 2004.
If you have not received your tables by mid-March, phone INFOexpress on 0800 257 773 to order copies. Please have your IRD number handy when you make the call.
ACC earners' levy rate
For the tax year commencing 1 April 2004, the ACC earners' levy rate will remain at 1.2 cents (GST-inclusive) in the dollar. The annual maximum earnings on which earner levy is payable has increased from $88,728 to $92,189.
This change to the annual maximum earnings is included in the PAYE deduction tables, which apply from 1 April 2004.
Late filing penalties
Late filing penalties may apply if your Employer monthly schedule (IR348) (EMS) is filed late or if you don't file one. If you are a small employer (you pay your deductions to us monthly) your EMS is due by the 20th of each month after the month of deduction. If you are a large employer (you pay your deductions to us twice-monthly) your EMS is due on the 5th of each month after the month of deduction. The late filing penalty is a flat rate of $250 for each late EMS. This amount is payable one month after the due date of the schedule. If the late filing penalty is not paid by the due date, late payment penalties and interest may also apply.
However, we do understand the challenges that you may face as an employer and that the unexpected does happen from time to time. With this in mind, if you do file your schedule late we won't automatically charge the late filing penalty if:
- this is the first time you've filed late, or
- you have filed all your returns on time in the previous 12 months.
We will send you a letter reminding you to file your schedule.
If you file a schedule late during the next 12 months, we will charge a late filing penalty.
Child support deduction notices
If you deduct, or have been asked to deduct, child support on behalf of an employee, we will send you, (in mid-March) a new notice for every employee you deduct child support for. This is because all paying parents are reassessed for the new tax year starting 1 April (if there is no change you will not receive a new notice).
The child support deduction notice tells you when to make deductions for your employee and the amount to deduct.
Usually we issue an individual notice for each employee you make deductions for. However, we can also send you deduction notices in the following formats:
- a consolidated deduction notice, notice in schedule form showing all additions and changes to child support payments for multiple employees on the same schedule
- both individual deduction notices and a consolidated deduction notice.
You may find it easier to process deduction notices if they are sent in one of the above formats. If you would like to change the format of your child support deduction notices please contact us on 0800 220 222.
Provisional tax due date
For those who pay provisional tax and have a standard balance date of 31 March, your third installment of 2004 provisional tax is due on 7 March 2004. As this day falls on a Sunday, all payments received on or postmarked 8 March 2004 will be treated as being received on time.
You can make your payment:
- electronically through your bank, or
- by taking the payment slip into your nearest Westpac bank, or
- by sending us your cheque and payment slip.
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Date published: 23 Nov 2004
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