Pay as you earn (PAYE)

As an employer, you must:

• make the correct PAYE deductions from your employees' earnings using the appropriate tax code, and
• meet your filing and payment obligations for PAYE and its related tax types, such as
  • student loan deductions, and
  • KiwiSaver contribution deductions.

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Employer responsibilities

Pay as you go (PAYG) withholding

If you make payments from which withholding is required, eg wages to employees or payments to businesses that do not quote an ABN, you must register with the ATO before you first withhold.

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Tax is deducted from schedular payments (formerly withholding payments) made to people who are not employees but work for you on a contract-for-service basis.

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Schedular payments (formerly Withholding payments)

Withholding tax is not generally deducted from payments made to independent contractors.

However, withholding tax may be deducted if the independent contractors have not quoted their ABN, or, if the foreign resident withholding provisions apply.

If you're paying interest, dividends or royalties to people who are not New Zealand residents, you need to deduct non-resident withholding tax (NRWT) from the gross amount paid.

This amount is non-resident passive (formerly withholding) income (NRPI, formerly NRWI). If you pay NRPI, you'll need to register as an NRWT payer.

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Non-resident withholding tax

Foreign resident withholding (FRW) is part of the pay as you go (PAYG) withholding system.

FRW requires payers to withhold tax on payments made to foreign residents for particular types of activities.

These activities are:

• payments for promoting or organising casino gaming junket arrangements
• payments for entertainment and sports activities
• payments under contracts for the construction, installation and upgrading of buildings, plant and fixtures and for associated activities

The rate of withholding is set at a default rate. This rate can be varied to match the expected tax payable in particular cases by applying to the ATO.

The FRW does not affect existing PAYG and non-resident withholding obligations on payments:

• made to foreign residents engaged as employees, and
• of interest, dividends and royalties made to foreign residents.

An annual tax return should be lodged by the foreign resident and the FRW amounts withheld are a credit against the tax assessed.

Most benefits given to employees other than their salary or wages are fringe benefits. There are four main groups of taxable fringe benefits:

• motor vehicles available for private use
• free, subsidised or discounted goods and services
• low-interest loans
• employer contributions to sick, accident or death benefit funds, specified insurance policies and non-monetary contributions to superannuation schemes.

If these benefits are enjoyed or received by employees as a result of their employment, including those benefits provided through someone other than an employer, the benefits are liable for FBT.

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Fringe benefit tax

FBT is a tax paid on certain benefits employers provide to their employees or to their employees' associates.

FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.

The term "benefit" is broadly defined and includes any rights, privileges or services. You provide a fringe benefit when you:

• allow an employee to use a work car for private purposes
• give an employee a cheap loan
• reimburse an expense incurred by an employee
• provide entertainment by way of food, drink or recreation.

The FBT year is from 1 April to 31 March.

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Fringe benefits tax (FBT): a guide for employers

Any contribution an employer makes to a superannuation fund for the benefit of an employee is liable for tax.

However there is an exemption for employer contributions to the KiwiSaver scheme and certain superannuation funds. The exemption applies where these contributions do not exceed the lesser of the employee's contributions or 4% of the employee's gross salary or wages.

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Employer superannuation contribution tax (formerly specified superannuation contribution withholding tax)
KiwiSaver

The superannuation guarantee is a Commonwealth Government program that requires employers to provide superannuation support for their employees. If you are not a resident of Australia but employ workers on a full-time, part-time or casual basis, contractors wholly or principally for labour or company directors, you are still required to provide your workers with superannuation support for work performed in Australia.

The superannuation you provide must be paid to a complying Australian superannuation provider.

You should provide each eligible employee with minimum superannuation contributions of 9% (the charge percentage) of their earnings base.

Contributions you make for your employees to a complying Australian superannuation fund are generally tax deductible up to certain limits.

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See also Superannuation - a guide for employers

Some employees may need to make repayments to us for a student loan.

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Student loan deductions

Payers with an accumulated higher education loan programme (HELP) debt must have additional amounts withheld from their payments under the PAYG withholding system once their payments are above the minimum repayment threshold for an income year.

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See Higher education loan programme essentials

Some employees may need to make repayments to us for child support. When this occurs we will often request the employer to deduct this from an employee's wages and pass these deductions to us.

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Child support deductions

Sometimes employers are required to deduct money from employees' salary/wages under the Child Support Scheme. You don't need to do anything unless you are asked to by the Child Support Agency. If this happens you will receive an employer package about what to do.

Glossary - Business income tax

Definitions
ATO Businesses