Making deductions from an employee's pay
Depending on their circumstances there are a number of deductions you may need to make from your employee's pay:
PAYE (pay as you earn)
You need to deduct PAYE from your employee's salary and wages at the approved rate. This rate includes ACC earner's levy.
Use our PAYE/KiwiSaver deductions calculator to determine the amount of PAYE to deduct from their salary and wages.
You may be required to make child support deductions from your employees pay. If you are, Inland Revenue will send you a notice detailing the amount you need to deduct.
Some employees may have a student loan and will use a student loan (SL) tax code. Depending on how much you pay them and which tax code they use you'll need to deduct student loan repayments as per the PAYE tables each time you pay them.
Unless new employees qualify for an exemption from automatic enrolment, you will need to start KiwiSaver deductions from their first pay. Information about deductions can be found in our KiwiSaver employer guide (KS4).
You're required to make employer contributions towards your employee's KiwiSaver account or complying fund. The minimum amount you'll need to contribute is 3% of your employee's salary or wage.
Use our PAYE/KiwiSaver deductions calculator to work out how much to deduct. You may also be asked to make extra deductions, either by your employee or by us.
You'll have to deduct tax from the employer superannuation cash contributions you pay to your employee's KiwiSaver or superannuation account. This is called employer superannuation contribution tax (ESCT).
You'll find it a great help to watch this video on how ESCT works.
Your employees have the opportunity to donate to approved donee organisations and the tax credit from the donation can be offset against their PAYE deductions. This is only available for employers that file returns electronically and is a voluntary scheme for employees. Read our Payroll giving (IR617) guide for more information.
These deductions apply only to employees. Student loans and some other deductions can only be made with written consent from your employee. Business.govt.nz has more information on your employer deductions obligations.
Account for fringe benefits
Fringe benefits are benefits provided to employees in addition to their salary and wages or as part of their salary package. If you provide fringe benefits (perks) to your employees or shareholder-employees, generally you must pay Fringe benefit tax (FBT) on the value of these benefits and need to file FBT returns. Most employers prefer to file their FBT returns online as the online process helps get it right.
File your returns online using our eFBT - Fringe benefit tax quarterly return service.
Read our Fringe benefit tax guide (IR409) for more information.
The four main groups of fringe benefits are:
Generally, if a vehicle is available for your employees or shareholder-employees private use, you'll be liable for FBT whether or not your employee actually uses the vehicle privately. But there are some exemptions.
Free, subsidised, or discounted goods or services
If you provide goods or services to your employees at less than cost price you'll be liable for FBT.
FBT is charged on low-interest loans (when interest is charged at less than the market rate) made to your employees or shareholder-employees.
Contributions to funds, insurance, and superannuation schemes
Any contributions you make for your employees may be subject to FBT.
When calculating FBT use the GST-inclusive value, except for those benefits that are GST-exempt, e.g., like low interest loans and life insurance.