New Zealand Payroll – Introduction
When you employ staff you’re responsible for deducting from their pay the correct amount of:
- Income Tax (PAYE)
- KiwiSaver Contributions, if they’re a member of KiwiSaver
- Child Support Payments, if they owe child support
- Student Loan Payments, if they have a student loan
If any of your staff are members of KiwiSaver then you must pay your employers’ contribution to their fund.
The employer’s contribution for the New Zealand superannuation scheme (Kiwi Saver) is a maximum of 3%. Employees are also required to make a contribution out of their wages. There are exemptions and if an employee has opted out of Kiwi Saver there is no requirement for the employer to make contributions.
Therefore it’s important to understand the circumstances and process that enables employers to be spared making contributions.
If you are hiring New Zealand employees and are required to deduct withholdings you may face some challenges.
In order to be a New Zealand employer you need an IRD number (NZ tax file number) and to get an IRD number you need a New Zealand bank account in the name of the NZ employer. Because of New Zealand’s Anti-Money Laundering and Counterterrorism Financing legislation, New Zealand banks are often reluctant to open up an account for a non-resident.
For a number of reasons you may have determined that you can carry on your activities without the need for a New Zealand bank account and the only purpose you would need an IRD number is to register as an employer.
This might be problematic.
We can assist by processing your payroll without the need for you to register as an employer (and jump through the hoops to get there). There is no charge for a quick chat so we can talk you through the NZ payroll issues.
Non Taxable Allowances
You should be very careful when negotiating non-taxable allowances with a New Zealand employee.
In New Zealand, non-taxable allowances are purely reimbursing by nature. The employee does not include the value of non-taxable allowances on their individual tax return (in fact, in most situations, New Zealand employees aren’t even required to file a tax return). Therefore there is no “square up” with Inland Revenue as is the case with the ATO when an employee includes their non-taxable allowances and claims any relevant costs.
Any payment by an employer in excess of the actual cost that the allowance is deemed to be reimbursing is actually a form of tax avoidance. This is because the employer claims the cost as a deduction and any excess is lost from the tax system. This is the result of the employee not including this income on their tax return and therefore not paying income tax on it.
We recommend you seek advice before factoring in non-taxable allowances such as telephone and motor vehicle.
New Zealand Payroll Processing Services:
Our set up fee to process New Zealand payroll is $150 +GST plus $20 +GST per employee.
Our monthly fee is $50 +GST plus $20 +GST per employee per pay run. There is a minimum monthly fee of $150 +GST.
When a new employee starts or one terminates their employment, there is an additional fee of $20 +GST.
These fees cover:
- We can register you as a New Zealand employer
- We ensure ACC (Equivalent of Australia’s WorkCover) are notified
- We process your payroll and prepare payslips for your employees
- We calculate the correct withholdings
- We calculate the correct New Zealand superannuation (Kiwi Saver) employer contributions (along with the employer superannuation tax which forms part of these contributions)
- We prepare all monthly employer reports and lodge these with Inland Revenue
- We prepare and lodge all monthly Kiwi Saver returns
New Zealand Contractors vs Employees
You need to take some care when employing independent contractors. As to the types of roles that can be allocated to a contractor, it would a good idea to read our blog post by clicking on this link.
If you have a self-employed contractor working for you, you won’t need to deduct PAYE, but may need to deduct tax.
If you do hire a contractor you will need to ensure they complete the correct tax rate declaration for contractors which is the IR330C. The IR330C will tell you the rate of tax to be deducted. You should note that contractors can elect their own tax rate which can be 0%. If the contractor hasn’t chosen an individual rate you are required to use the standard rate shown on the IR330C declaration.
If the contractor doesn’t give you an IR330C or it’s not completed, you must deduct tax from the payments made to them (called schedular payments) at a higher rate (called the no-notification rate).
New Zealand Fringe Benefits Tax (FBT)
If you supply fringe benefits, eg company cars or parking spaces to your employees, you will need to register for fringe benefit tax and make a payment by the due date. The definition of what constitutes a fringe benefit in New Zealand is different than the rules that apply in Australia.
You will need to ensure you get proper advice when providing employees with non-cash allowances.
There is no charge for a quick chat so give us a call on 1300 791 600 and we can talk you through the issues.
Questions About New Zealand Payroll?
Our New Zealand expert, Mike Reddy, is a New Zealand accountant and NZ-registered tax agent based in Sydney. He works with small businesses throughout Australia to help take care of your New Zealand tax questions and Returns from our Sydney-based office.
Having been preparing and filing New Zealand tax returns since 1994, Mike is the most experienced New Zealand tax agent in Australia. He is regularly engaged by Australian tax agents and accountants who have clients with New Zealand interests.
So when it comes to looking after your New Zealand affairs, Mike can definitely help you with the right advice.
Call us now on 1300 791 600. There is no charge for a quick chat so we can talk you through the issues.