- 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. This includes ACC earner's levy.
Use our PAYE/KiwiSaver deductions calculator to determine the amount to deduct from their salary and wages.
You may be required to make child support deductions from your employees pay. We'll send you a notice with the amount you need to deduct.
Some employees may use a student loan (SL) extension to their tax code. You'll need to deduct student loan amounts as per the PAYE tables each time you pay them.
Unless you have new employees eho don't need to be automatically enrolled, you'll 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 contributions you pay to your employee's KiwiSaver or superannuation account. This is called employer superannuation contribution tax (ESCT).
You can allow employees to have part of their salary paid as a donation to approved donee organisations. The tax credit from the donation can be offset against their PAYE deductions. This is only available for employers that file returns electronically. Our Payroll giving (IR617) guide has more information.
- 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. Generally you must pay fringe benefit tax (FBT) on the value of these benefits and file FBT returns. You can do this in myIR.
The four main types 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 the vehicle is used 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, eg, low interest loans and life insurance.