Payroll News - 2009
Payroll News issue 116 April 2009
- 1 April legislation changes - a quick summary
- PAYE rates
- Choosing tax codes
- Employees using special tax codes
- Publications and website updates
- Changes to secondary tax thresholds
- The independent earner tax credit (IETC)
- Redundancy tax credit
- Tax changes for small and medium-sized businesses
- Making payments on time
- KiwiSaver changes from 1 April 2009
- Fringe benefit tax (FBT) update
- Corrections
Welcome to Payroll News
In this issue: legislation changes, PAYE rates, choosing tax codes, the independent earner tax credit (IETC), tax changes for small and medium-sized businesses, the redundancy tax credit and KiwiSaver changes.
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.
1 April legislation changes - a quick summary
- A three-year programme of changes to personal income tax rates and thresholds from 1 April 2009.
- Introduction of an independent earner tax credit (IETC) of up to $10 a week from 1 April 2009, increasing up to $15 a week from 1 April 2010.
- Changes to KiwiSaver from 1 April 2009, including a reduced employee contribution rate of 2% of the member's gross pay, capping of compulsory employer contributions at 2%, and discontinuing the employer tax credit and the fee subsidy.
PAYE rates
Remember, personal income tax rates have changed and you should use the new PAYE rates when working out your payroll for pay periods ending on or after 1 April 2009.
If you forgot to use the new rates, use our PAYE online calculator to correct this in the next pay you calculate. You can find our PAYE / KiwiSaver deductions calculator under "Work it out".
The updated PAYE tables (IR340 weekly and fortnightly, and IR341 four-weekly and monthly) are available under "Work it out" or you can get copies by calling INFOexpress on 0800 257 773.
Choosing tax codes
April is always a good time to ensure you're using the correct tax codes for your employees.
Choosing the right tax code can be a challenge for some people so we've developed a decision tree to make it easier.
Your employees can check they are using the correct tax code by going to 'Work out your tax code'.
Employees using special tax codes
Employees or contractors can apply for a Special tax code/student loan special repayment rate application (IR23BS) to get PAYE deducted or student loan repayments made at a special rate.
If you have an employee on a special tax code they'll give you a new IR23BS for the 2009-2010 tax year. We've calculated their special tax code for 2010 to include the tax rate changes and the independent earner tax credit (IETC) if applicable. When your employee gives you their new certificate please use the new rate from the next pay you calculate. Please note the certificate takes effect only from the date it is signed and given to you.
Publications and website updates
To reflect the recent legislative changes we're updating forms, guides and booklets and all the content on the IRD and KiwiSaver websites. You'll be able to view the updated guides or download and print forms after 1 April 2009.
Some of our printed publications won't be available until later so we can include the tax assistance changes for small and medium-sized businesses.
Changes to secondary tax thresholds
The secondary tax thresholds have changed, effective from 1 April 2009.
Secondary tax codes are used if an employee is already using a primary tax code (M, ME, ML, M SL or ME SL for their main source of income from a job or a benefit) and decides to take another job. The second job is secondary employment.
The new secondary tax rates and thresholds from 1 April 2009 to 31 March 2010 are:
| Income threshold | Tax rate |
Tax code (no SLS) |
Tax code (with SLS) |
|---|---|---|---|
| $0 - $48,000 | 21% | S | S SL |
| $48,001 - $70,000 | 33% | SH | SH SL |
| $70,001 and over | 38% | ST | ST SL |
The employee must complete another IR330 for secondary employment, using one of the secondary tax codes - S, SH or ST. Employees repaying student loans must use the S SL, SH SL or ST SL code if they're already using the M SL code for another job.
The independent earner tax credit (IETC)
From 1 April 2009 some of your employees may be entitled to the IETC. It's up to your employees to work out if they're eligible for it.
If they are, they must give you a completed Tax code declaration (IR330), showing their new tax code, so they can receive the tax credit through their pay. They can only use this new tax code for their main job or source of income.
The tax code for IETC is ME, or ME SL for people with a student loan. You can get the updated Tax code declaration (IR330) under "Forms and guides", or you can order copies through INFOexpress by calling 0800 257 773.
Find out more about independent earner tax credit (IETC).
Redundancy tax credit
Redundancy can be a difficult time and any affected employees should know about the redundancy tax credit.
Employees may be eligible to receive the redundancy tax credit if their employment ceased because their position was no longer available.
A redundancy tax credit can be claimed at any time. Eligible employees don't need to wait until the end of the year.
Find out more about the redundancy tax credit.
Tax changes for small and medium-sized businesses
On 4 February 2009, the Government announced a package of proposed changes designed to improve cash flow and reduce compliance costs for small and medium-sized businesses.
At the time of printing, these changes were before Parliament. Once enacted, these changes are expected to take effect from 1 April 2009.
We'll be writing to employers affected by the changes in April. For detailed information, please go to the Policy Advice Division website.
Making payments on time
We realise there are times when you may not be able to make payments on time. If you think you can't pay the full amount by the due date, please call us as soon as possible on 0800 377 771.
Payment options
Paying your tax by the due date is still the best option. However, if you're unable to pay your tax in full and on time, we can help you work out the best options for paying the amount due. We take your individual circumstances into account when we do this. We may consider options such as paying by instalments, if payment in full would result in hardship.
By contacting us early and entering into an instalment arrangement before the due date, you can avoid being charged the 4% late payment penalty. You will still be charged interest on the tax owing, but no further penalties will be charged during the term of the arrangement, provided the instalments are paid on time.
Find out more about payment options.
Filing returns
Even if you can't make the payment, you still need to send your return in on time to avoid late filing penalties. The penalties for late filing are separate to late payment penalties. The late filing penalty is charged at a flat rate for each Employer monthly schedule (IR348). For small employers the penalty is $250 and for large employers the penalty is $500. The penalty is payable one month after the due date.
KiwiSaver changes from 1 April 2009
Employers will have received a letter in March outlining KiwiSaver changes and what they mean for you.
Here's a summary of the KiwiSaver changes from 1 April 2009:
- The minimum employee contribution rate will reduce to 2% of a member's gross pay.
- The compulsory employer contribution (CEC) rate will increase to 2% and won't increase further in future years.
- Voluntary employer contributions will be liable for employer superannuation contribution tax (ESCT).
- The employer tax credit (ETC) will be removed - this change affects employers, not KiwiSaver members.
- The KiwiSaver Act has been amended and the Employer Relations Act amendment relating to KiwiSaver has been repealed. So, KiwiSaver compulsory employer contributions must be paid in addition to an employee's gross salary and wages, unless through good faith bargaining, employers and employees agree otherwise. For more information, see the Department of Labour fact sheet.
Many of the KiwiSaver forms and guides you give to new employees may be out of date from 1 April 2009. Download new copies of the updated forms and guides under "Forms and guides".
Fringe benefit tax (FBT) update
New fringe benefit rates are effective from 1 April 2009.
Currently, you have the option of applying the alternate rate* option or using the single rate** option of 64%. Please note-the single rate option changes from 64% to 61% from 1 April 2009.
There is no change to the alternate rate option of 49% for quarters 1 to 3 of the 2008-2009 income year.
The alternate rate option for the year 1 April 2009 to 31 March 2010 has changed. The following rates will apply:
| Income range | Tax rate |
|---|---|
| $0 - $12,250 | 0.1429 |
| $12,251 - $39,110 | 0.2658 |
| $39,111 - $53,850 | 0.4925 |
| $53,851 and above | 0.6129 |
The FBT rates change from 2010 - we'll keep you updated.
* Formerly multi-rate
** Formerly flat rate
Corrections
Electronic payments
There was an omission in the "Do you make electronic payments?" article in the March 2009 issue of Payroll News about payments on behalf of employees. The fourth bullet point explaining details required was incomplete. The section should have read:
"So, the details we need when you make payments to us on behalf of employees are:
-
your business name and phone number
-
the date of the payment
-
the total amount of the payment
- each employees name, IRD number and how much to credit them."
We apologise for this error. The online version of the newsletter has already been amended.
PAYE tables correction
There's a printing error on page 58 of the latest IR341 four-weekly and monthly PAYE deduction tables for 2010, "Monthly Pay Periods - Earnings $1,655 to $1,925".
In the "Earnings" column, the earnings amount of $1,905 is missing. This means the figures in that line aren't correctly aligned. The line should read:
We apologise for this error. Please note our PAYE online calculator has the correct figures.
Alan Quinn
Manager
Customer Insight
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Date published: 31 Mar 2009
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