Payroll News - 2006

Payroll News Issue 84 April 2006

• Agricultural industry - changes to the withholding tax rules
• Special tax code certificates -error
• PAYE calculators
• Workers engaged in "activity in the community" projects
• Have you ceased employing?
• Child Support - Language Line
• The 2006 income tax timetable

Welcome to Payroll News

In this issue we tell you about changes to the withholding tax rules that affect the agricultural industry, and the 2006 income tax timetable.

If you have an employer topic you'd like to see covered in this newsletter, please write to the Editor, Payroll News, PO Box 2198, Wellington or email us at payroll.news@ird.govt.nz and we'll aim to cover the topic in a future edition.

Agricultural industry - changes to the withholding tax rules

From 1 April 2006 withholding payments to companies or other contractors for agricultural, horticultural or viticultural work done in relation to the pruning and/or thinning of fruit trees or vines, or the picking and/or packing of fruit or grapes will fall under the Withholding Payments Regulations. You must deduct withholding tax at the rate of 15 cents in the dollar unless the contractor holds a certificate of exemption.

If you currently hire or intend hiring any contractor to undertake this type of work or service they must complete a Tax code declaration (IR330) unless they provide you with a certificate of exemption. If they do not complete an IR330 please deduct withholding tax at the no-declaration withholding tax rate.

You'll need to record the payments in your Employer monthly schedule (IR348) whether or not you deduct withholding tax. You should also include the gross withholding payment details in the "Earnings and/or withholding payments not liable for ACC earners' levy" column.

If the contractor is GST-registered they will charge GST on the goods or services supplied. If you receive a tax invoice, deduct withholding tax on the GST-exclusive amount.

The new rules apply to all payments made after 1 April 2006.

Example

Brent is an orchardist in Napier. In February 2006, he hires a contracting company, Full Fruition Ltd to pick his crop. Full Fruition Ltd doesn't have a current certificate of exemption. Brent has made payments to Full Fruition Ltd in February and March and will make a final payment to them in April. Brent hasn't deducted withholding tax from the payments made to Full Fruition Ltd in February and March but is required to deduct 15% withholding tax from the payment made to Full Fruition Ltd in April.

Special tax code certificates - error

Some of you may have received a special tax code certificate from an employee for the tax year commencing 1 April 2006 which advises you to deduct earners' levy by multiplying the gross income by 0.012. This is incorrect. The correct deduction rate for earners' levy is 0.013.

If you have received a special tax code certificate advising you to deduct earners' levy by multiplying the gross earnings by 0.012, please deduct at the rate of 0.013 as deducting at the lower rate may cause your employee to have a tax bill at the end of the year.

PAYE calculators

It's the start of a new tax year. The 2007 tax year goes from 1 April 2006 to 31 March 2007. By now you will have received your PAYE deduction tables for this tax year.

If you didn't receive 2007 PAYE deduction tables but would like them, please call INFOexpress on 0800 257 773 to request either the 2007 Weekly and fortnightly PAYE deduction tables (IR340) or the 2007 Four-weekly or monthly PAYE deduction tables (IR341).

If you prefer to use our online services, you can use the online PAYE calculators to work out how much PAYE to deduct from your employee earnings weekly, fortnightly, four-weekly or monthly. Go to Work it out > PAYE calculator 2007 >

The amount to deduct from holiday pay can be calculated by going to Work it out > PAYE > Calculate tax on holiday pay - 2007. Please remember to update your bookmarks for these calculators as well.

If you currently view our tax deduction tables on the web and have bookmarked these as a favourite, please remember to delete the 2006 bookmark and bookmark the 2007 edition from 1 April 2006.

Workers engaged in "activity in the community" projects

As an employer, you may become a sponsor for a recognised community activity. This is where a person on a benefit chooses to participate in an "activity in the community" project. They receive an allowance of $21 a week above their income support for this work. As a sponsor, you'll be responsible for paying this allowance. You can claim this back from the Ministry of Social Development every four weeks.

A sponsor is not an employer of any community work participants -rather, you are acting as an agent on behalf of Work and Income in paying the allowance to the participant. This means the allowance is not subject to GST or income tax in your hands. You are not required to make any deductions from this allowance. If you are interested in becoming a sponsor you can contact the Ministry of Social Development on 0800 778 008.

Have you ceased employing?

If you've stopped employing, or you are transferring your employees from one business structure to another that has a different IRD number (for example changing from a partnership to a company), you need to let us know that you've ceased being an employer. You can do this by calling our employer line on 0800 377 772, or by completing a Business cessation (IR315) form. You can get this form by calling 0800 257 773 or from www.ird.govt.nz

It's not enough to simply end date all of your staff on an IR348, as you will still be registered as an employer, and we will continue sending you your IR348 and IR345 each month.

Child Support - Language Line

Child Support is now using Language Line, a telephone interpretation service managed by the Office of Ethnic Affairs. Language Line offers an interpreter to Child Support's phone customers who do not speak English as a first language. Your employee can access Language Line by calling our Child Support number 0800 221 221 and asking for the language they want. An interpreter is usually available within two minutes.

The 2006 income tax timetable

Now that the new tax year has arrived we'll be sending out donations, childcare and housekeeper rebate claim forms, as well as personal tax summaries, summaries of earnings, tax returns and forms. See the following timeline.

April

Rebate claim forms

We'll automatically send a rebate claim form to anyone who claimed for donations, childcare or housekeeper rebates last year. Receipts must be attached when making a claim. If you or your employees haven't received a form by the end of April and want to make a claim, go to our website or call INFOexpress on 0800 257 773. Remember to have your IRD number handy.

Individual tax return (IR3)

If your employees also received income from self-employment, a rental property, withholding payments, a partnership, or other income not taxed at source, they'll need to fill out an individual tax return. We'll send these out during April and May.

May

Summaries of earnings

If your employees need to file a tax return and also received salary, wages or withholding payments they'll need a summary of earnings. These will be sent out in May.

June

Personal tax summaries

If an employee's only income is from salary and wages and we think they need an end-of-year tax square-up, we'll automatically send them a personal tax summary in June.

July

Personal tax summary requests

If your employees don't automatically receive a personal tax summary in June but think they may need an end-of-year tax square-up, they can go to Work it out > Individual income tax >Personal tax summary calculation for 2006 or call INFOexpress on 0800 257 444.
Please note: this will not be available until mid April on the website.

A reminder to large employers we only need one employer monthly schedule (EMS) a month. Most large employers make two payments a month. However, you only need to send in the EMS once to cover the entire period. This is due at the same time as your second payment. For example, for the April period, the first payment is due on 20 April and the second payment and the EMS are due on 5 May.

 

Kathleen Clement
National Manager
Delivery, Planning and Initiation

 

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Date published: 29 Apr 2006

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