Payroll News - 2009
Payroll News issue 118 June 2009
- Independent earner tax credit
- The Job Support Scheme
- Child support deduction notices
- ACC earners’ levy
- Fringe benefit tax returns
- KiwiSaver update
- Minimum pay
- Newsletters online only
Welcome to Payroll News
In this issue: Independent earner tax credit, child support deduction notices, ACC earners’ levy, KiwiSaver update, online services and fringe benefit tax update.
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.
Independent earner tax credit
From 1 April 2009 some of your employees may qualify for the new independent earner tax credit (IETC).
Who qualifies?
The IETC is for individuals who are New Zealand tax residents (not companies, partnerships or other organisations) who earn an annual income of between $24,000 and $48,000 and are not eligible for working for families tax credits (either personally or through their partner) or receiving:
- an income-tested benefit
- New Zealand superannuation
- a veteran’s pension
- the foreign equivalent of any of these payments.
Find out more by going to our independant earner tax credit section or by phoning us on 0800 257 700.
How much is it?
Employees earning between $24,000 and $44,000 can claim the maximum IETC of $10 per week, or $520 a year. The tax credit reduces by 13 cents for every dollar of income over $44,000 and up to $48,000. If your employee earns over $48,000 they won’t qualify.
What are the IETC codes?
Employees who are eligible for the IETC use the ME tax code, or the ME SL tax code if they have a student loan.
What do you need to do as an employer?
The introduction of the IETC shouldn’t affect you too much. Your only obligation is to update your employee’s tax code if they provide you with a new Tax code declaration (IR330), and change the amount of PAYE deducted. The PAYE tables and online calculators have been updated to reflect the new PAYE deduction rates.
Updated IR330s are now available. Go to "Forms and guides" to download a copy or your employer can complete the form online. You can also get copies by calling INFOexpress on 0800 257 773.
The Job Support Scheme
The Job Support Scheme* is administered by Work and Income to help employers retain workers who might otherwise be facing redundancy. On 27 April 2009 the scheme was extended to include employers with 50 to 100 employees. To find out more about the scheme visit the Work and Income New Zealand website
For information on employment relations, paid parental leave, holiday entitlements, sick leave, redundancy, restructuring and the Job Support Scheme visit the Department of Labour’s website
Find out more about tax obligations for employers and employees.
* Formerly the nine-day fortnight.
Child support deduction notices
If you have been asked to deduct child support on behalf of an employee you may receive new child support deduction notices from us in late July or early August. We send out new notices for every employee who has had a change in the amount of child support they are required to pay. This happens because liable parents may be reassessed as part of the Salary and Wages Income Finalisation (SWIF) process.
If you do not receive a new notice for an employee, continue to deduct child support at the existing rate.
What is SWIF?
The SWIF process occurs in February each year. This is when we calculate a liable parent’s assessment based on their earnings for the ten months April to December, plus an estimate of their expected earnings for February and March. In July, we compare our estimate to the liable parent’s actual full year earnings.
New assessments and deduction notices
A new assessment is issued only if the liable parent’s assessment income changes by more than $500. The new deduction notice you receive tells you when to make deductions for your employee and the amount to deduct.
If you would like to talk to us about SWIF please contact us on 0800 220 222.
If your employees have any questions about their new assessment or deduction amount, please ask them to call us on 0800 221 221.
ACC earners’ levy
From 1 April 2009 the ACC earners’ levy increased to 1.7% ($1.70 per $100) but the levy is included in the PAYE tables so you won’t need to do anything.
Income liable for ACC earners' levy includes:
- salary and wages (overtime, back-pay, holiday pay, long service leave, bonuses or gratuities and taxable allowances)
- shareholder-employee salaries
- salaries to partners in a partnership
- income from self employment.
Income not liable for ACC earners' levy includes:
- retirement payments
- redundancy payments
- non-taxable allowances
- rents
- interest and dividends
- estate and trust income
- royalties
- income for a partnership earned by a non-working partner
- jury fees
- witness fees
- taxable and non-taxable pensions.
Note: If you have retirement, redundancy or schedular payments (formerly withholding payments) these are completed in the Employer monthly schedule (IR348) box “Earnings and/or schedular payments not liable for ACC earners’ levy”.
Fringe benefit tax returns
This is a good time of the year to review your fringe benefit tax (FBT) filing frequency, particularly if you want to elect to file annual or income year returns.
The three types of fringe benefit tax return forms are:
- Fringe benefit tax annual return (IR422), for employers who elect to file returns for the year ended 31 March
- Fringe benefit tax income year return (IR421), for companies that have shareholder-employees
- Fringe benefit tax quarterly return (IR420), for employers who must file every quarter, and those who choose to do so.
Annual filing
If your gross annual tax (not including earners’ levy) and ESCT deducted is less than $500,000, or if you were not an employer in the preceding year, you can file annual returns.
If you want to elect to file annual returns for the year ending 31 March 2010, you must make an election by 30 June 2009.
Your Fringe benefit tax annual return (IR422) is due by 31 May.
Income year filing
If you’re a company with shareholder-employees and your annual gross tax (not including earners’ levy) and ESCT deducted is less than $500,000, or you are a closely held company and you only provide up to two motor vehicles for private use to shareholder-employees you can file income year returns.
If you want to elect to file income year returns you must make an election by the last day of the first FBT quarter in the income year for which the election applies. For example, a company with a 30 June balance date must make an election by 30 September 2009 to file a return for the year ended 30 June 2010.
You should file your Fringe benefit income year return (IR421) by the due date for paying your end-of-year income tax.
We cannot accept late elections. If your election is late, we'll let you know and you'll have to continue filing quarterly returns until the next financial year.
How do I elect to file annual returns?
You can elect to file annual or income year returns by completing the online FBT election form. Go to "Get it done online" for more information or you can call us on 0800 377 772.
Quarterly filing
If your gross annual tax (not including earners’ levy) and ESCT deducted is $500,000 or more you must account for FBT quarterly.
Your returns, with any payments, are due on:
| Quarter | Return | Due date |
|---|---|---|
| Quarter 1 | June | 20 July |
| Quarter 2 | September | 20 October |
| Quarter 3 | December | 20 January |
| Final quarter | March | 31 May |
Find out more about FBT or download our Fringe benefit tax guide (IR409) under "Forms and guides".
KiwiSaver update
In the current economic environment, some of your employees may be thinking about ways to maximise their take-home pay. Your employees may also ask about the time it takes to process their KiwiSaver contributions.
Employee contribution
If your employees currently contribute 4% or 8% to KiwiSaver, they can choose to lower their rate to 2% of their gross pay. If your employee asks you to change their KiwiSaver contribution rate you can do this through your payroll system or your payroll provider. Ask your employees for written confirmation - they can complete a new KiwiSaver deduction form (KS2) or write to you. There is no need to contact us.
Employee contribution holiday
If your employee has been contributing to a KiwiSaver fund for 12 months or more they can choose to apply for a contribution holiday. This is a break from making contributions, through the employee’s salary or wage, from between three months and five years. You’re not required to make compulsory employer contributions to your employees on a contributions holiday. If you do, you’ll be liable to pay employer superannuation contribution tax on those contributions.
A contribution holiday can be granted to your employee before their 12 months membership if they are experiencing financial hardship. They need to apply to us and you’ll receive a notice asking you to stop making further deductions if the contribution holiday application is accepted.
Find out more about contribution holidays.
Time to process contributions
When you send an employee’s KiwiSaver contribution to us, that starts a careful checking process before we transfer the money to a scheme provider.
We’ve developed a flowchart to explain the process and show the average time to process KiwiSaver contributions. The chart may be helpful if your employees ask about the time it takes for their money to go from their pay to the scheme provider.
Minimum pay
We’ve received some queries on the increase in minimum wage rates.
Minimum pay is administered by the Department of Labour.
For information on minimum pay and the minimum wage rates from 1 April 2009 go to the Department of Labour’s website
Newsletters online only
We're fast-tracking business tax information to your inbox. In the near future we'll be publishing our business newsletters online only. Subscribe to "Newsletters and bulletins" and you'll receive an email notification when each new issue is published.
Alan Quinn
Manager
Customer Insight
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Date published: 01 Jun 2009
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