Skip to main content

Ngā utunga tōpū Lump sum payments

Back

Lump sum payments – also called extra pay – include:

  • annual or special bonuses
  • cashed-in annual leave
  • retiring or redundancy payments
  • payments for accepting restrictive covenants
  • exit inducement payments
  • gratuities (tips)
  • back pay
  • back paid holiday pay
  • lump sum holiday pay
  • employee share scheme benefits – if you choose to deduct tax.

Overtime or regular payments are not lump sum payments.

Calculating PAYE

You must deduct PAYE on lump sum payments. How you calculate PAYE depends on your employee’s tax code.

Student loan repayments and KiwiSaver

If your employee uses an M SL or ME SL tax code and earns more than $374 a week

You’ll need to deduct student loan repayments from the lump sum payment.

If your employee uses an S SL or ST SL tax code

You’ll need to deduct 12% from the whole lump sum payment to cover their student loan repayment. The pay period threshold does not apply.

If your employee is a KiwiSaver member

You’ll need to deduct contributions from all lump sum payments except:

  • redundancy payments
  • retiring allowances
  • accommodation you provide
  • an accommodation allowance
  • free or discounted shares under an employee share scheme
  • payments under a voluntary bonding scheme funded by the Ministry for Primary Industries, the Ministry of Health or the Ministry of Education.

Holiday pay paid in advance

There are two ways to calculate PAYE on holiday pay paid in advance of your employee taking annual leave. You can use the standard method or the alternative approach.

 

Filing employment information

You need to tell us about the lump sum payment in the same period you made the payment. There are 2 options.

File separate employment information about the payment

This is outside your regular employment information filing schedule.

File the information about the payment within:

  • 2 working days of the date of the payment, if you file electronically
  • 10 working days of the date of the payment, if you file by paper.

Include information about the payment in the next regular reporting schedule

In some circumstances you can include the payment when you file employment information about the employee’s next regular payday.

You can only do this if:

  • You file electronically
  • You tell us about the payment before your ‘end date’ for the payment of PAYE and other deductions to us.

Your end date is:

  • The last day of the month if you pay PAYE and other deductions to us monthly.
  • The 15th of the month and the last day of the month if you pay PAYE and other deductions to us twice a month.
Employer's guide IR335 (PDF 361KB) Download form