Payroll giving is a new voluntary scheme for employees. They will be able to donate to their chosen approved donee organisations from their pay and receive an immediate tax credit reflected in their PAYE. Tax credits for payroll donations are to be recorded on the EMS (IR348) and EDF (IR345).
Tax credits for payroll donations are calculated at 33.3333% of the donation made.
Employers who file their EMS and EDF electronically can choose to offer payroll giving to their employees.
How the employee pay calculation is affected
The following table shows how tax credits for payroll donations would affect an employee's pay calculation if:
- their gross income is $4,164 per month, and
- they donate $150 using payroll giving and receive their $49.99 tax credit for payroll donations, and
- they have a student loan, and
- they are a KiwiSaver member (using a contribution of 4%).
Example: Employee paid monthly
|less PAYE (including earner's levy)||
|less student loan deductions||
|less KiwiSaver employee deductions||
|less donation (not on EMS)||
|plus tax credit for payroll donations||
|Take home pay (after donation)||
The deductions and contributions for KiwiSaver and the student loans have been calculated using the tax code of M SL as at April 2009. The KiwiSaver employee deduction rate shown in this example is 4%.
All deductions are calculated on the gross wage. Deductions are not calculated on the gross wage less the donation.
How the EMS is affected
The following table shows how total tax credits for payroll donations would appear on the EMS.
|Gross earnings and/or withholding payments||
|PAYE and/or withholding tax||
|Tax credits for payroll donations||
|Earnings and/or withholding payments not liable for ACC earner levy||
|Student loan deductions||
|Child support deductions||
|KiwiSaver employer deductions||
How the EDF is affected
The EDF will not have an additional field for the total tax credits for payroll donations. Keypoint one will be updated to be net PAYE, ie PAYE and/or schedular payments minus total tax credits for payroll donations.
Calculating PAYE payable
The following table shows how to calculate PAYE payable. That is PAYE and/or schedular payments minus total tax credits for payroll donations.
|less tax credits for payroll donations||$ 7,392.00|
Changes to payment processing
The DED/IED (pseudo tax types used for employer deduction payments) payment splitting processes are unchanged.
The ir-File EDF needs to be modified to show net PAYE rather than gross PAYE at Keypoint one.
There is one change to the DED payment distribution process. DED distribution needs to take the PAYE net value (PAYE minus tax credits for payroll donations) from the EMS to determine the amount to split to the PAYE tax type.
Further information about the payroll giving scheme
Go to the list of questions and answers as asked by members of the software developers industry. The information has been split into the following six categories:
- employers - flexibility and responsibilities
- payroll intermediaries
- responsibilities of employers
- limits on employees
- other queries
Date published: 24 Feb 2014