These notes assume you have only a few employees.\u00a0 When PAYE deductions exceed $100,000 per year ($500,000 from 1 April 2009) the rules change.<\/p>\n
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If someone comes to you and says they are self employed, even if they are registered for GST, you must still check to see if you should be deducting PAYE. IRD has prepared a pamphlet IR336, which is an excellent guide for helping you determine who is an employee and who is self employed.\u00a0 If you get it wrong IRD could take the PAYE from you on top of the full amount you have paid already.<\/p>\n
Warning:<\/strong><\/p>\n The onus is on you to get it right.\u00a0 If in doubt, study the IR336 pamphlet and if necessary come and see us for some advice.\u00a0 The IR336 can be obtained from either the internet or by ringing our office or the IRD.<\/p>\n The \u201cEmployee\u201d should also be careful.\u00a0 If he\/she turns out not to be a self employed person, IRD can disallow expenses claimed. The consequence is an assessment for tax, use of money interest at approximately 12% (all backdated for 4 years or more) and possible consideration of penalties.<\/p>\n <\/p>\n Every employee must complete an IR330 tax declaration certificate which shows their tax code. We suggest you always get this completed as the first job on the day they start work.\u00a0 The certificate stays in force until the employee advises you of changed circumstances by giving you a new IR330 form to use.<\/p>\n Keep the IR330s for 7 years after the employee leaves.<\/p>\n <\/p>\n Decide on your pay period.\u00a0 Obtain the appropriate tax tables.\u00a0 If paying weekly you would take the total income each week including overtime and add any taxable allowances and look up the tables.\u00a0 Unless you find the exact figure in the tables, look for the income figure immediately below the figure you have calculated.\u00a0 Having located the correct income figure, identify the tax to deduct.<\/p>\n <\/p>\n Some people may have tax losses or have some other reason why they ought to be taxed at a different rate from the standard tax tables.\u00a0 These people may apply to the IRD for a special tax code and will be issued with form IR23.<\/p>\n If an employee hands you an IR23, deduct tax at the rate shown on the form instead of using the tax tables.\u00a0 IR23 certificates last for one tax year only.\u00a0 You must insist the employee obtains a fresh certificate each year. If\u00a0 you do not receive it, switch to using the figures in the tax tables.<\/p>\n <\/p>\n Cleaners, agricultural contractors, commission sales people and some others are not true employees.\u00a0 You must still deduct tax but these people are allowed to claim expenses against their income.\u00a0 Sales people, for example, are likely to incur car running costs, telephone expenditure and can claim for the use of their home. You still have to deduct some tax on account.\u00a0 Obtain an IR330 certificate and find the appropriate rate in the tax tables for the type of work being done.<\/p>\n <\/p>\n You do not have to deduct tax for anyone you employ working around your home.\u00a0 You may treat these people as self employed.<\/p>\n <\/p>\n Employers must register with the IRD.\u00a0 They will receive monthly green forms to fill in.\u00a0 Complete the gross wages paid to each employee and the amount of tax deducted.\u00a0 When someone joins the firm or leaves it fill in the appropriate date.\u00a0 We recommend you have a way of cross checking the accuracy of the figures you put on these forms. Taking the figures from your return forms, you can deduct the total PAYE for the month from the total gross wages. The difference will be the net amount paid to your staff (A).\u00a0 Total all the wage payments on your bank statements (B).\u00a0 A and B should be the same amount.\u00a0 It is quite common for people to make a payment and forget to enter it in their wage records. This check gives you a better chance of being right.<\/p>\n <\/p>\n When a new employee joins your firm, you must supply them with KiwiSaver information and deduct contributions starting with their first pay.<\/p>\n Contact us for more information about KiwiSaver.<\/p>\n <\/p>\n PAYE deductions are considered to be money held in trust.\u00a0 The department takes a much harsher attitude to people who fail to pay PAYE deductions than they do for failure to pay income tax.\u00a0 The money is not yours and should not be used to pay your creditors.\u00a0 Accordingly, IRD has the right not only to sue you personally for tax deductions not remitted, even if your business is a limited liability company, but also to claim from any officer of the company involved in not paying the deductions. This includes an officer who should have been checking the PAYE deductions were made, who \u00a0\u00a0could be your wages clerk. Late payment penalties are levied at 5% for the first month (split into an initial 1% and then a further 4%) and 1% for each succeeding month the PAYE remains unpaid. Mistakes occur. Once every two years you can be let off the late payment penalty. There is also a use of money interest charge.<\/p>\n IRD can also penalise people who do not send in their returns. The fine for sending in your PAYE return late is $250.<\/p>\n <\/p>\n The due date for payment is the 20th of the month following the month you are accounting for.\u00a0 So if you are doing your PAYE return for September wages paid, you must lodge the return by the 20th October.<\/p>\n If the 20th of the month falls on a Saturday, Sunday or public holiday, the due date for both the return and payment is the next working day.<\/p>\n You can remit the tax by paying it at the Westpac Bank, posting it or paying it through internet banking or telephone banking.<\/p>\n <\/p>\n If you receive a tax code declaration with \u201cSL\u201d be sure to deduct the loan deduction as well as the PAYE.<\/p>\n <\/p>\n Add the income in the usual way for your pay period and look up the tables.\u00a0 Check to ensure you have the correct\u00a0 code. You might have been asked to deduct tax at secondary rates.<\/p>\n <\/p>\n If you do not receive a tax code declaration IR330 from an employee you have to deduct tax at 46.2%.<\/p>\n <\/p>\nTax declaration<\/h2>\n
How to deduct tax<\/h2>\n
Special tax codes<\/h2>\n
Withholding tax<\/h2>\n
Non business<\/h2>\n
Returns to IRD<\/h2>\n
KiwiSaver<\/h2>\n
Penalties<\/h2>\n
Paying the PAYE<\/h2>\n
Student loans<\/h2>\n
Daily or casual employees<\/h2>\n
No declaration<\/h2>\n
Holiday pay<\/h2>\n