As part of our plan to simplify the tax system, we’re sending out letters and e-mails to those we think might be on the wrong tax code. Our aim is to make sure they’re having the right amount of PAYE deducted from their income.
In some cases we recommend tailored tax codes to customers. These letters are recommendations only, so customers will need to apply for a tailored tax code if they want to start using one.
We’re continuing to send letters to employers with employees using an incorrect tax code. If one of your customers is affected by this change, we';ll notify you as well.
We previously issued letters to customers who are using secondary tax codes on their New Zealand superannuation from the Ministry of Social Development (MSD). We've listened to your feedback and will only ask MSD to change a tax code if it's clearly incorrect.
Based on feedback from customers and tax agents, we will not send tax code notifications to IR3 filers who are using only secondary tax codes on their PAYE sourced income. However, if a customer is using an incorrect tax code for another reason (such as not using an SL tax code when they have a student loan) we’ll still send these notifications whether they’re an IR3 filer or not.
If you've applied for a tailored tax code already, this will stay in place and you will not need to make any more changes for the current financial year. If the tailored tax code you're on is no longer suitable, you can complete a Tax code declaration - IR330 to change this. If you need to apply for a tailored tax code, you can do so in myIR.
Complete my tax code declaration
We're aware that some tax intermediaries have encouraged their clients to use a higher tax rate, such as a secondary tax rate (ST code), to help offset tax bills based on other income they receive.
Due to changes in the Tax Administration Act 1994 Schedule 5 Part A clause 4, this is no longer allowed if the income being taxed at the higher tax rate is their only source of PAYE income.
The legislation was updated with effect from 1 April 2019 by the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019 Sec 109(2) which changed the phrasing around use of tax codes when considering an income source from annual income is to total PAYE income payments are.