The Government of New Zealand has worked towards improving the administration of PAYE to benefit businesses and employers. Earlier, the employee’s income information was typically reported to the Inland Revenue Department (IRD) on a monthly cadence. This monthly information, which is used by IRD to calculate the customers’ tax obligations and entitlements is often out-of-date and doesn’t accurately reflect the current financial situation.
Looking at this concern, in 2018, the Government of NZ passed legislation that will save the business time and make sure that all the information received for calculation of Customers tax and entitlement is accurate and on time.
So, It doesn’t matter which region you belong, Canterbury, Wellington, Auckland, etc, if you are an employer in NZ and you need to be compliant with the new regulations by 1st April.
If you’re involved in your organization’s payroll function, you must be aware of it. But, many employers still need to adapt their current payroll processes to support the new payday filing.
Since, the time is running out fast, get organized now!!
Make sure you update your payroll processes in time to avoid your business getting penalized.
This blog will help you know the in-depth information about payday filing, NZ. Topics we are covering here are–
- What is a payday filing?
- How does payday filing work?
- What happens once I’ve opted into payday filing?
- How is payday filling different?
- How payday filling will Impact you?
- What you should do now?
What is payday filing?
Payday Filing is a New Zealand government initiative. This initiative has changed the way businesses report to the IDR that employee payments such as wages, pay as you earn (PAYE) and other deductions have taken place.
If you’re an employer in New Zealand and paying more than $50,000 PAYE and Employer Superannuation Contribution Tax (ESCT) per year, from 1 April 2019, you need to file electronically through payroll software or myIR
If your total PAYE/ESCT is less than $50,000, for the previous year ending on 31 March 2018 you can file using–
- Online portal
- by paper returns (but only from April 2019)
How does payday filing work?
Currently, the Payday filing is voluntary. There are three ways you can file online:
- Direct from your payroll software
- By uploading the file in myIR
- On-Screen in myIR
Payroll software is easy to use. This is because it allows your payroll information, like salary, wages, PAYE or any other deductions. This information is sent to Inland Revenue at the same time as you pay your employees.
The due date for paying and submitting the IR 345 stays the same.
myIR is also another easy option. All you need to do is to open your myIR account, check the Payroll returns account in My business section and file your employment information and employee details in “My business section”.
Remember: Once you’ve opted into payday filing during the voluntary period, you can’t move back to the monthly filing process.
What happens once I’ve opted into payday filing?
Payday filing will start at the initial days of the month after you opted-in. An employer needs to file the entire employment information to IRD online within two working days of the payday.
In the first month–
- You need to delegate others or reset access for others to use the Payroll returns account
- You need to file the final Employer monthly schedule (IR348) for the previous month.
- Once the schedule is done, file the Employment deductions (IR 345) and make the payment for that IR348 on the required due date
- Then, file your employment information each payday
- Later, submit any new employee details before or on their first payday.
How does the employment information file will look like?
The information you submit will appear as it is in your IR348 and you’ll include the same information you do now. However, you need to provide certain details:
- ESCT (employer superannuation contribution tax) for each employee
- pay period start and end dates
- pay cycle, eg weekly, monthly, ad hoc
- payday date
There are no changes in the mode of payment or in due dates. You have to pay monthly or twice-monthly as per the process you follow currently.
How is payday filling different?
In the existing scenario, employers file employee earnings and PAYE information with Inland Revenue every month, regardless of how frequently they are paying their employees. But, now the payday filing is not following the same process. From 1 April 2019, this information will be reported to Inland Revenue every time your employees are paid.
The current trend of submitting an employer monthly schedule will be changed now, all you need is to submit an employment information schedule after every payday.
This entire process of collecting payroll information more regularly will help IRD offer increased certainty about employees’ tax obligations and entitlements.
How payday filling will Impact you?
All employers with $50,000 or more of PAYE and ESCT (Employer Superannuation Contribution Tax) deductions a year will need to upgrade to a payroll system that is payday filing compliant and review some of their payroll procedures.
There is an option to file online or file paper returns to those employers whose combined PAYE and ESCT deductions are less than $50,000. If you are eligible to file paper returns, you can choose to either:
- File the Employment Information Schedule within ten working days of paying staff, or
- File two Employment Information Schedules — on the 15th of the month and the last day of the month.
The extent to which the payday filing changes affect your company will totally depend on whether or not your company is using the automatic payroll software to file the return. If you are not using the payroll software now, assess it. Payroll software is a good and timely investment for your business.
What you should do now?
In total, there are approximately 50,000 employers in New Zealand. They all need to transition to payday filing within a relatively short time duration.
As payday filing will require either an upgrade or replacement of your existing payroll system, you should start reviewing your requirements now. The incorporation of payday filing is an opportunity which will help in broadening the existing business systems.
Now is a perfect time to start using payroll software if your company doesn’t have it already. Don’t wait and end up in last-minute rush, get in touch with us for the payroll integration services now.