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 TAX
OBLIGATIONS FOR EMPLOYERS
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Employers have several legal employment tax and record-keeping obligations. They must keep a wage book, get each employee to fill out a tax code declaration (IR330, 2004), deduct PAYE and pay these deductions to the IRD, deduct child support and student loan repayments if required, pay fringe benefits tax on perks they give employees, complete an employer monthly schedule (IR348, 2004), complete a monthly summary (IR345, 2004) and pay the IRD by the due date given (BIZ, 2004l). All records must be kept (in English) for seven years (IR333, 2004).
Every employee must complete a Tax Code Declaration (IR330, 2004), which is used to calculate how much tax to deduct from the employee. Employers must keep this declaration record for seven years. If no declaration is made, employees will be charged the higher ‘no declaration’ rate (BIZ, 2004i).
Each month you must send in a copy of your Employer Monthly Schedule (IR348, 2004). This monthly schedule will contain the names, IRD numbers and tax codes and gross earnings of your employees (along with PAYE, child support and student loan deductions).
You will also need to fill in and send an Employer Deductions form (IR345, 2004) every month, showing total deductions payable (PAYE, withholding tax, child support deductions and student loan deductions). If you wish you may make these payments online using the IRD’s Internet filing service, ir-File (IR317, 2004).
Record Keeping
In general, records kept must be sufficient to calculate your income and expenses (BIZ, 2004c).
These records should include (BIZ, 2004c):
· Cheque books
· Deposit books
· Petty cash books
· Log books
· Bank statements
· Wage book and other wage records
Record-keeping is important to better keep track of your business’s finances, make things easier for your accountant, and speed up any audits (BIZ, 2004c).
Pay As You Earn (PAYE)
Employers must deduct PAYE from employees’ wages, and pay this amount to the IRD. The amount paid depends of the employee’s tax code (IR333, 2004). For instance, if an employee has a student loan (and an ‘SL’ tax code), then further deductions will be made. Similarly, if child support payments need to be made, the IRD will tell you how much needs to be deducted (BIZ, 2004i). ACC earners levies are included in PAYE, to pay for non-work-related accident compensation.
The IRD has organised an online PAYE calculator, making it easy for employers to calculate how much PAYE to deduct from employees’ wages (located at https://www.ird.govt.nz/cgi-bin/form.cgi?form=paye2004). Alternatively, you can work out how much to deduct using tax code tables, supplied by the IRD.
Accident Compensation Corporation (ACC)
As soon as you register as an employer, you will automatically be registered for Accident Compensation Corporation (ACC) payments (BIZ, 2004l). Your employees pay ACC earner levies (automatically included in the PAYE deductions), which cover non-work-related injuries.
Employers are also required by law to provide work-related personal injury cover for all their employees (ACC, 2004d). This cover is ‘no fault’ cover, which means an injured employee will receive full care and compensation, no matter who is responsible for the injury (ACC, 2004d). How much you pay is determined by the type of work your employees do (see http://www.businessdescription.co.nz), and how much you pay in wages (ACC, 2004d).
ACC will invoice you once a year for this cover, so you need to budget for it (BIZ, 2004l). New employers will be asked to estimate their earnings, and will be invoiced for their estimate. When ACC receives their actual earnings from the IRD, you will be accredited or debited for the difference between your real and actual earnings (ACC, 2004c).
ACC also requires that you provide a safe work place to reduce any risk of injury (see ‘Health and Safety in Employment Act, 1992’ section) (ACC, 2004b).
Withholding Payments
When employers are paying workers who are not employees (i.e. private contractors – see ‘Employees vs. Private Contractors’ section), they need to make withholding payments. ACC payments and student loan repayments are the private contractor’s responsibility, and you do not have to deduct anything for them. These people need to complete an IR330 (2004) form and use the WT tax code (IR333, 2004).
Goods and Services Tax (GST)
Anyone who has a turnover of $40,000 per year from taxable activity in New Zealand must register for GST. If you expect to be receiving over $40,000 per annum in turnover, you must register also. As a rough estimate in calculating whether you need to register for GST – if your monthly turnover is around $3,333 per month (40,000 / 12), you should register (IR365, 2004). You can easily register for GST online (https://www.ird.govt.nz/cgi-bin/form.cgi?form=ir360).
Fringe Benefit Tax (FBT)
Fringe benefit tax is tax on non-monetary ‘perks’ you give to employees (BIZ, 2004q). These perks include things like vehicles, loans and discounted
goods. If an employer gives their employees perks of this nature (and they stated so while registering as an employer), they will automatically be registered for filing quarterly FBT returns. If an employer is not offering benefits to his/her employees (and he/she stated so while registering as an employer), then they need not worry about paying FBT (IR333, 2004).
For a list of references, click here.
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