Payroll News - 2008

Payroll News Issue 111 October 2008

• The new demo ir-File site
• Helping your employees ensure they are using the right tax codes
• Update on implementing tax rate changes
• The updated Tax code declaration form
• Child support variation codes on the Employer monthly schedule (IR 348)
• Employer's deducting more than $100,000 PAYE and ESCT (employer superannuation contribution tax)*
• KiwiSaver refunds
• Large employers filing of employer monthly schedules (EMS)
• Having trouble paying your employer monthly schedule (EMS) on time?

Welcome to Payroll News

In this issue: The new demo ir-File site, helping your employees ensure they are using the right tax codes, an update on implementing the tax rate changes, a note about the updated tax code declaration form, information on child support variation codes, a reminder for employer's deducting more than $100,000 PAYE and ESCT, a note on KiwiSaver refunds and some tips when completing your employer monthly schedule.

If you have a topic you'd like to see covered in this newsletter, please email us at payroll.news@ird.govt.nz and we'll aim to cover it in a future edition.

The new demo ir-File site

Have you considered using ir-File to lodge your monthly payroll details but found the demonstration site less than user friendly? Want a new tool to train your staff on the use of ir-File? On 15 September we introduced an all new ir-File demo. Go to "Get it done online", "File an employer schedule (ir-File) service", "Demo".

The new demo includes real screen shots to take you through the step-by-step process, making it easier than ever to get started, and offering you the opportunity to save time and money.

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Helping your employees ensure they are using the right tax codes

We want to reduce the number of employees getting into debt as a result of using incorrect tax codes. It is important that an employee is on a correct tax code as it helps ensure they pay enough tax and the correct amount towards their student loan.

Your employees can work out if they’re on the right tax code by using our Work out your tax code decision tree.

If any employees are identified as using the incorrect tax code, we'll write to you to let you know which code they should be on. If you receive this notification, you'll need to change their tax code, starting from the next pay period to make sure they pay the correct amount of tax and/or student loan repayments as quickly as possible.

Read more information on tax codes.

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Update on implementing tax rate changes

PAYE rates

Now we're in October you should have used the new PAYE rates when doing your payroll for pay periods ending on or after 1 October 2008. If not, you need to correct this by using the new rates in the next pay you calculate.

The updated PAYE tables (weekly and fortnightly, and monthly and four-weekly) have been sent to you and are available online - go to "Work it out". You can also get copies by calling INFOexpress on 0800 257 773

If you have employees using special tax codes

We have recalculated special tax codes to show the tax rate changes and where there has been a change we have issued new certificates. If your employee gives you a new Special tax code deduction rate certificate (IR23) please use the new rate from the next pay you calculate. Please note the certificate only takes effect from the date it is signed and given to you.

If you have employees using secondary tax codes

The thresholds for secondary tax codes have changed and from 1 October 2008 to 31 March 2010 are:

Income range	Tax code
$0 - $40,000	S or S SL
$40,001 - $70,000	SH or SH SL
$70,001 upwards	ST or ST SL

Employees can elect a new secondary tax code if they believe their annual income will be below the new threshold. Those employees using secondary tax codes, whose total taxable income is less than $14,000, as well as employees who earn more income in the second half of the year, may find they are entitled to a tax refund at the end of the income year, ie, after 31 March 2009.

At the end of the tax year (31 March 2009) employees can check if they have paid too little or too much tax by using the personal tax calculator - go to "Work it out", keyword "Income tax".

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The updated Tax code declaration form

The Tax code declaration (IR330) form has been updated due to the tax rate changes happening from 1 October this year. Please ensure the updated forms are available to your employees from 1 October. You can download copies from "Forms and guides" or order them from INFOexpress on 0800 257 773.

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Child support variation codes on the Employer monthly schedule (IR348)

It is important the child support deductions shown on your Employer monthly schedule (IR348) match the total amount deducted from each employee’s pay.

If the amount you deduct is different from the amount shown on the child support deduction notice (CS503) you need to enter a variation code on the Employer monthly schedule (IR348). We keep a record of the amount we expect from each employee so if we receive a payment that is less than expected, it can mean the employee is shown as having a debt. Also, if we receive more than is expected this may be applied to debt the employee has with Inland Revenue and could affect a future payment if it was meant as an advance.

To avoid situations where an employee is wrongly shown to have a debt, please use one of the following variation codes. These are entered in the box marked "CS code" on the Employer monthly schedule (IR348).

Payment in advance (A)

Sometimes you may pay an employee in advance, for example when they will be on holiday on the next payday. In this case, deduct the same amount of child support as you would if you were paying the employee on the usual payday.

You must include the child support with the deductions for the period when the employee was given the advance pay. The child support will be more than usual for that period, so enter "A" as the variation code.

Ceased employment (C)

If an employee stops working for you, only deduct child support from the last full pay you give them, and from any holiday pay owed. Enter "C" as the variation code so we can remove the employee from your records.

If an employee stops then restarts working for you within the same month, do not use this variation code.

Previously deducted (D)

Sometimes the full amount of child support requested from an employee's wages may not have been deducted because you previously made an advance payment. Your child support will be less than usual for that period, so enter "D" as the variation code.

Protected net earnings (P)

If you are unable to deduct the full amount of child support requested from an employee’s wages due to protected net earnings, enter "P" as the variation code. See page 14 of the Employers guide (IR335) for more information on protected net earnings.

Short-term absences (S)

If an employee is off work on unpaid leave for a short period of time and you are unable to deduct any or all of the amount of child support requested, enter "S" as the variation code.

Other (O)

If none of the other variation codes explain why the amount of child support deducted does not equal what was expected, enter "O" as the variation code.

For more help

If you have any questions about completing the child support requirements on the Employer monthly schedule (IR348), please phone Child Support on 0800 220 222.

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Employer's deducting more than $100,000 PAYE and ESCT (employer superannuation contribution tax)*

We have identified that the PAYE and ESCT figures from the IR345 payment slip have sometimes been entered incorrectly. For example if a PAYE amount of $2,071.52 is entered as $207,152.00 this will change your status (within Inland Revenue) from a small to a large employer.

This has caused a number of queries where the employer is actually still under the $100,000 threshold. You are a large employer if your gross annual PAYE and ESCT deductions are $100,000 or more per year.

It is important you enter the PAYE amount clearly on the IR 345 payment slip so we can enter your PAYE correctly.

* Formerly specified superannuation contribution withholding tax (SSCWT)

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KiwiSaver refunds

Are you expecting a KiwiSaver employer or employee refund (code KSE or KSR)?

We can accept personal bank account details on the phone but not business bank accounts. In that case please fill out a Fast refunds form (IR587) and send to us so we can pay your refund directly to your bank account.

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Large employers filing of employer monthly schedules (EMS)

You may be aware we have at times been able to reverse incorrect EMS. However, from now on we will only be able to reverse an incorrect EMS for special cases.

Before filing your EMS, please check the following:

• You are only filing one EMS each month (the period end date is located under your company IRD number). If your company is restructuring we still only require one EMS with complete details. If you have already filed your EMS and now want to add extra employees or change any existing details you need to use an Employer monthly schedule amendments form (IR344).
• Check your EMS has the correct period including correct month and year as well as all new and existing employees.
• You can only file one EMS per employer's IRD number. If your company has more than one branch and you require another IRD number please contact us.
• Make sure you have included all the pay days for the full month.

For example in the table below there are two Employer deductions (IR345) required but only one EMS.

Large employer due dates

Period PAYE deducted	Payment due date Employer deductions (IR345)	Due date Employer monthly schedule (IR348)
2/10/08	20 October 2008	5 November 2008
9/10/08	20 October 2008	5 November 2008
16/10/08	5 November 2008	5 November 2008
23/10/08	5 November 2008	5 November 2008
30/10/08	5 November 2008	5 November 2008

• If you are changing employer IRD numbers, you need to file your EMS under the correct IRD number. For example, if your company is bought out and the new owner combines both company payrolls into their existing IRD number, please ensure the schedule is submitted on the correct IRD number. The important periods are the first and last month schedule filing. They also need to cease the previous employers IRD number, they can do that by filing a nil return and including end dates on all employees.

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Having trouble paying your employer monthly schedule (EMS) on time?

From November you may get a non-payment penalty as well as a late payment penalty. If you think you may have difficulties making a payment, call us as soon as possible on 0800 377 772 or find out more about penalties.

Alan Quinn
Manager
Customer Insight

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Date published: 15 Oct 2008

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