New Zealand Payroll & Tax Compliance
Holidays Act Reform: New Zealand Government enacts the Employment Leave Act 2026
Update
The New Zealand Government has enacted the Employment Leave Act 2026 (“the Act”), which replaces the existing Holidays Act 2003 upon receiving Royal Assent on August 06, 2026. The Act introduces a simplified framework for calculating and administering employment leave, with significant changes to annual leave, leave payments, sick leave, bereavement leave, alternative holidays and public holiday entitlements, including changes to the Leave calculation methodologies.
The Act will come into force on August 06, 2028, providing employers and payroll providers with a transition period to update their leave policies, payroll systems and processes. Until the new legislation comes into force, employers must continue to comply with the existing Holidays Act 2003.
The key amendments impacting payroll and leave administration under the Employment Leave Act 2026 are detailed below along with the provisions applicable under the existing Holidays Act 2003:
1. Classification of working hours
The Employment Leave Act 2026 introduces three categories of working hours: standard hours, additional hours and casual hours, which determine how leave is accrued and paid.
- Standard hours: Hours an employee is required to work under their employment agreement and for which the employer must pay them, including paid breaks. Certain mutually agreed hours worked beyond the contracted hours may also qualify as standard hours.
- Additional hours: Hours worked beyond standard hours that attract additional payment and which the employee has the right to refuse. This also includes hours worked under an availability provision where an additional payment applies. Additional hours do not include hours that a salaried employee works beyond their standard hours under an availability provision that they are compensated for by their salary (so they do not receive additional pay). During annual leave, employers cannot require employees to work under an availability provision.
- Casual hours: Hours worked where the employer is not required to offer work and the employee is not required to accept it. An employee cannot have both standard and casual hours for the same role.
2. Annual Leave Entitlement and Accrual
- Holidays Act 2003:
- Employees are entitled to four weeks’ annual leave after 12 months of continuous employment.
- Annual leave continues to accrue during paid leave, unpaid sick, bereavement and family violence leave, parental and volunteers leave, periods receiving accident compensation, and the first week of other unpaid leave.
- Annual leave balances are maintained in weeks and automatically scale with changes in an employee’s working pattern. An increase in weekly hours effectively increases the leave balance, while a reduction in hours reduces it.
- Employment Leave Act 2026:
- Annual leave accrues from day one in proportion to standard hours worked, at a minimum rate of 0.0769 hours of annual leave for each standard hour worked, equivalent to four weeks’ leave where standard hours remain unchanged.
- Annual leave and sick leave generally continue to accrue during paid leave and legislatively provided unpaid leave, except during periods when the employee receives accident compensation. Leave does not accrue during non-legislated unpaid leave. For certain paid leave not provided by legislation, employers and employees may agree that annual and/or sick leave will not accrue.
- Accrued annual leave hours are banked. Accordingly, the leave balance reflects hours accrued based on hours worked and does not automatically increase or decrease when an employee’s working pattern subsequently changes.
3. Taking Annual Leave
- Holidays Act 2003: Annual leave is taken in portions of the week. Employers and employees must agree on the portion of a week being taken based on what ‘genuinely constitutes a working week’ at the time leave is taken. Employers must not unreasonably withhold consent to annual leave once the employee becomes entitled to it, although entitlement generally arises after 12 months of employment.
- Employment Leave Act 2026:
- Employees take accrued annual leave in hours, allowing employees to take leave for any part of a working day. Employers and employees must continue to make reasonable efforts to agree on when leave is taken.
- From the start of employment, employers cannot unreasonably withhold consent to requests to use accrued annual leave and must allow employees to take the annual leave available in their balance at each 12-month anniversary. They may also allow employees to take annual leave in advance.
- Annual leave can be taken only against standard hours. Where the employment agreement or work roster specifies the employee’s standard hours, leave is taken against those hours.
- Where standard hours are not specified, the employer and employee must establish a notional roster or an agreed methodology for determining the standard hours against which annual leave will be taken.
4. Annual Leave Cash-Up
- Holidays Act 2003: At an employee’s request, the employer and employee may agree to cash up a maximum of one week of annual leave in each 12-month period of continuous employment.
- Employment Leave Act 2026: In every 12 months (not including the first 12 months of employment), at an employee’s request, they and their employer can agree to cash up a maximum of 25% of the amount of annual leave in their annual leave balance as at the end of the day before their most recent start date anniversary. The employer and employee must agree to the cash-up. This provides greater flexibility for employees with larger accumulated leave balances and may reduce employers’ outstanding leave liabilities.
5. Sick Leave Entitlement, Accrual and Taking Leave:
- Holidays Act 2003: Eligible employees become entitled to 10 days’ sick leave after six months of employment, with a further 10-day entitlement arising every subsequent 12 months, regardless of the number of days worked per week. Sick leave is generally taken in full days; although employers may allow part-day sick leave, the current Act does not provide a specific framework for this.
- Employment Leave Act 2026:
- Employees accrue sick leave from day one in proportion to standard hours worked at a minimum rate of 0.0385 hours per standard hour worked, providing the equivalent of 10 days per year for an employee working five days a week with consistent daily hours. Sick leave accrual is capped at 160 hours; further accrual stops once the cap is reached and resumes when the employee uses some of their accrued entitlement.
- Sick leave is taken in hours, with one hour of accrued sick leave used for each hour of work missed. Employees can therefore take sick leave for any part of a working day. Sick leave may be taken against standard hours and, where applicable, additional hours specified in the work roster at the time the employee notifies the employer. Where standard hours are not specified, a notional roster may be used to determine the hours against which sick leave is taken.
6. Bereavement and Family Violence Leave:
- Holidays Act 2003: Eligible employees can access bereavement and family violence leave after six months of employment. Both leave types are generally taken as full days. Where an employee works for part of the day before taking leave, the entire day may be counted as a leave day.
- Employment Leave Act 2026: All employees, including those working casual hours, can access bereavement leave and 10 days of family violence leave from day one. These entitlements remain day-based, but employees can take leave for part of a day.
For employees with standard hours, bereavement and family violence leave can be taken against the same days and hours applicable to sick leave. Employees working casual hours can take these leave types against casual hours specified in a work roster.
7. Public Holidays - Determining an Otherwise Working Day (OWD)
Under both the Holidays Act 2003 and the Employment Leave Act 2026, entitlement to payment and alternative holidays for a public holiday depends on whether the day is an Otherwise Working Day (OWD).
- Holidays Act 2003: Where it is unclear whether a day is an OWD, employers and employees must consider various factors to determine whether the employee would otherwise have worked that day.
- Employment Leave Act 2026: A day is an OWD where the employee would have worked that day but for the public holiday, based on the days or pattern of work specified in their employment agreement. Where days of work are not specified, or an employee regularly works additional days, a new 50% test applies. The day will generally qualify as an if the employee has worked (or was on paid or unpaid leave) for 50% or more of the days of the week that correspond to the public holiday (e.g., Mondays) in the previous 13 weeks (or in the period they have been employed if it is fewer than 13 weeks).
8. Alternative Leave for Working on Public Holidays
- Holidays Act 2003: Employees receive a whole alternative holiday when they work on a public holiday that is an Otherwise Working Day (OWD), regardless of the hours worked. The alternative holiday can be taken on another OWD and may be cashed up 12 months after the entitlement arises.
- Employment Leave Act 2026: Employees accrue alternative leave in hours, at a rate of one hour for each hour worked on a public holiday that is an OWD. Alternative leave may also accrue for eligible on-call hours, subject to the employee’s employment agreement and the limit of the hours they would otherwise have worked on that public holiday.
Accrued alternative leave can be taken on any day or part of a day the employee could have worked under their employment agreement. Employees can request to cash up their accrued alternative leave at any time.
9. Annual Closedowns and Agreed Closures
- Holidays Act 2003: Employers may have one annual closedown per year and must provide employees with 14 days’ notice. Employees who are not yet entitled to annual leave at the start of the closedown receive 8% of their gross earnings since commencement of employment, with their annual leave anniversary date reset. Employers and employees may also agree to discontinue work at other times outside an annual closedown.
- Employment Leave Act 2026: Employers must provide 21 days’ written notice of an annual closedown, including the closedown dates, requirements to take paid or unpaid leave, and any other available leave arrangements. Annual leave will accrue from the start of employment and will be taken and paid under the normal leave rules. Accordingly, the current requirement to pay 8% of gross earnings to employees who are not yet entitled to annual leave at the start of an annual closedown, and to reset their annual leave anniversary date, will no longer apply.
Work stoppages outside an annual closedown are formally referred to as “agreed closures”. The agreement must be in writing at least 14 days before the closure and specify the applicable leave arrangements.
10. Leave Payment Calculations
- Holidays Act 2003: Different calculation methods apply to different types of leave, with complex rules for variable components of remuneration such as overtime, commissions and allowances.
- Employment Leave Act 2026: A single hourly leave pay rate will generally apply to annual leave, sick leave, bereavement leave, family violence leave, non-worked public holidays and alternative leave.
- The hourly rate will generally be determined based on the employee’s remuneration and working arrangement:
- Waged employees: Based on the lowest hourly rate payable for the shift from which leave is taken.
- Salaried employees: Based on salary attributable to one standard hour, including applicable availability compensation included in salary.
- Averaged Salary Employees (ASEs): Based on salary paid in the pay period divided by standard hours for that period, meaning the hourly rate may vary between pay periods while salary remains unchanged.
- Piece-rate employees: Leave pay will generally be based on an hourly average of piece-rate earnings, subject to the minimum wage requirement where applicable.
- Fixed allowances continue to be paid in full during leave. Bonuses, commissions and variable allowances generally do not form part of the hourly leave pay rate. Employers may provide leave payments that are more generous than the statutory minimum.
11. Annual Leave Payment Following Parental Leave
- Holidays Act 2003: A special payment rule applies to annual leave that becomes entitled during, or within 12 months after, parental leave. Such leave is paid based only on the employee’s average weekly earnings for the preceding 12 months, without the usual comparison with ordinary weekly pay. As the employee may have little or no earnings while on parental leave, this can result in a lower leave payment after returning to work.
- Employment Leave Act 2026: Annual leave taken after returning from parental leave will be paid under the same rules as leave taken at any other time. Employees will also continue to accrue annual leave during parental leave.
12. Payment for Working on Public Holidays
- Holidays Act 2003: Employees who work on a public holiday are generally paid at 1.5 times their Relevant Daily Pay (RDP) or Average Daily Pay (ADP) for the hours worked. Where a contractual payment for working on a particular day or public holiday is higher, the higher contractual amount applies. Employees who work only part of a public holiday are paid for the hours actually worked.
- Employment Leave Act 2026: Employees will receive the payments required under their employment agreement for hours worked, excluding any separate identifiable amount payable for working on a particular day or public holiday. In addition, they will receive the greater of 50% of their ordinary hourly rate or the applicable identifiable amount.
Where an employee works only part of their usual hours on a public holiday, they will receive public holiday pay for the hours worked and leave pay for the hours they would otherwise have worked but did not work.
13. Leave Compensation Payment (“LCP”)
Working additional hours - employees with standard hours
- Holidays Act 2003: When employees work additional hours, the extra hours and associated pay may be considered when determining what genuinely constitutes their working week and calculating leave payments. Employees therefore receive the benefit of additional earnings through higher leave payments when leave is taken.
- Employment Leave Act 2026:
- Employees with standard hours will receive a LCP instead of accruing annual and sick leave on additional hours worked.
- LCP is payable at 12.5% of the employee’s ordinary hourly rate for each additional hour worked and must be paid in the pay period in which the hours are worked.
- LCP must be paid separately from wages and other payments, including overtime rates and commissions, and must be separately identified in payroll records and payslips.
- The ordinary hourly rate for LCP and public holiday payments is generally the lowest applicable hourly wage rate, or the salary attributable to one standard hour of work.
- For piece-rate employees, it also includes the applicable hourly average of piece-rate earnings. LCP must be calculated on at least the minimum wage rate.
Casual Hours - Employees with No Standard Hours
- Holidays Act 2003: Employers and employees may agree to use “pay-as-you-go” annual holiday pay at 8% of gross earnings each pay period where work is intermittent or irregular. For sick leave, casual employees may technically become entitled to leave, although using the entitlement can be impractical where work patterns are irregular.
- Employment Leave Act 2026: Employees working casual hours will receive a Leave Compensation Payment (LCP) of 12.5% of their ordinary hourly rate for each casual hour worked, paid in the relevant pay period instead of accruing annual and sick leave.
Fixed-Term Employment
- Holidays Act 2003: Employees on fixed-term contracts of less than 12 months may agree to receive 8% pay-as-you-go annual holiday pay. Employees employed for less than six months do not qualify for sick leave.
- Employment Leave Act 2026: Fixed-term employees with standard hours will accrue annual and sick leave from their first day of employment and can use their accrued leave subject to the applicable rules. They will also have access to bereavement and family violence leave from day one. Fixed-term employees working casual hours will receive LCP instead of accruing annual and sick leave.
Employees with Multiple Roles
- Holidays Act 2003: The Act does not provide clear rules for applying leave provisions where an employee holds multiple roles with the same employer.
- Employment Leave Act 2026: Where an employee has two or more roles with standard hours, the employer and employee may agree in writing on how the roles will be treated for leave entitlements and payments. If no agreement is reached, the default position is that leave entitlements and payments will be determined separately for each role.
14. Pay Statements
- Holidays Act 2003: Employers are not generally required to provide employees with pay statements for each pay period. Employees may request information relating to their pay and leave records, which employers must provide as required.
- Employment Leave Act 2026: Employers will be required to provide a pay statement for each pay period under the Employment Relations Act. The statement must include specified information from the employee’s records, including payments and deductions, employer contributions and leave entitlements.
Pay statements may be provided in physical or digital form or made accessible through an online employee portal. Information relating to family violence leave must not be included in the pay statement.
Please note that the new rules will apply from the beginning of the employee’s first pay period starting on or after August 06, 2028, aligning the implementation with the employer’s pay cycle. Employers cannot adopt the new rules early. Until the new framework takes effect, employers must continue to comply with the Holidays Act 2003.
Employers will have one additional year after the Employment Leave Act, 2026 comes into force to update leave provisions in employment agreements. During this period, where existing contractual terms are more favourable than the new statutory requirements, employers must continue to apply the more favourable terms. From August 06, 2029, any contractual leave terms inconsistent with the new framework will be overridden by the minimum statutory requirements under the Act.
Mileage Rate Update 2026
Update
The following rates apply to business motor vehicle expense claims for the 2025–2026 income year:
- Tier 1 Rate:
Applies to the business portion of the first 14,000 kilometres travelled annually (including private use). This rate incorporates both fixed and running costs and reflects increased operating expenses, including higher fuel prices. - Tier 2 Rate:
Applies to the business portion of travel exceeding 14,000 kilometres per year and covers running costs only.
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol | $1.20 cents | 37 cents |
| Diesel | $1.30 cents | 38 cents |
| Petrol hybrid | $0.90 cents | 24 cents |
| Electric | $1.22 cents | 23 cents |
Budget 2026
Update
The Honorable Finance Minister presented the Budget 2026 on May 28, 2026. The proposals have been tabled before Parliament for approval and will be notified in the Gazette upon enactment.
There are no significant changes impacting payroll, individual income tax, or KiwiSaver that were released in the Budget apart from the simplification of Fringe Benefit Tax (FBT) Rules. Below are the key highlights:
1. Simplifying the Fringe Benefit tax (FBT) rules
The Government is simplifying the Fringe Benefits Tax (FBT) rules relating to private motor vehicle use. It has been proposed that maintaining detailed logbooks will no longer be required, and a practical “close enough is good enough” approach will be adopted, which will significantly reduce compliance and administrative costs for businesses.
2. Individual Income Tax and KiwiSaver rates remain unchanged as follows:
- Income Tax rates
| Income Ranga in NZD$ | Tax rate |
|---|---|
| 0 - $15,600 | 10.50% |
| $15,601 - $53,500 | 17.50% |
| $53,501 - $78,100 | 30.00% |
| $78,101 - $180,000 | 33.00% |
| $180,001 and over | 39.00% |
- The default KiwiSaver employee contribution rate will be 3.5% of the employees’ gross pay. If the employee wants to contribute more than the default rate, they can choose to contribute 4%, 6%, 8% or 10% of their pay.
Payroll Calculations & Business Rules Specification 2026-2027
Update
The Inland Revenue Authority released the Payroll Calculations & Business Rule specification for the year 2026-2027. Covering the rate updates and legislation changes proposed in the Budget 2025.
Below are the detailed amendments that impact payroll:
- ACC Earner’s levy rate change
Effective from April 01, 2026, the ACC Earner’s levy and its threshold limit will be increased as follows:
-
- Levy rate: $1.75 per $100 (1.75%)
- Maximum earnings: $156,641
- Maximum levy payable: $2,741.22
Further to the above, effective from 1 April 2027 to 31 March 2028, the rate will be revised to $1.83 per $100 (1.83%)
- Changes in KiwiSaver contributions
As proposed in the Budget 2025, the default Kiwisaver contributions of both employees and employers increased from 3 percent to 3.5 percent, effective from April 01, 2026. This will further increase to 4 percent starting April 01, 2028, as part of a phased implementation over three years.
Hence, the minimum Compulsory Employer Contribution for pay days commencing on or after 1 April 2026 is 3.5%.
Additionally, employees will have the option to reduce their KiwiSaver contribution rate to 3 percent, with employers matching this reduced rate. This opt-down will be valid for a period ranging from 3 (92 days) to 12 months, after which contributions will automatically revert to the default rate. This reduction can be applied multiple times at the employee’s discretion.
- Extension of Employer and Government Kiwisaver Contributions to 16 and 17-year-olds
Employees aged 16 and 17 who contribute to KiwiSaver will be eligible for both employer and government contributions, subject to meeting the relevant eligibility criteria. Government contributions will commence on July 1, 2025, while employer contributions will take effect from April 1, 2026. Employer contributions made to employees under 16 or over 65 are to be considered as voluntary employer contributions.
Budget 2025
A. Update
Honourable Finance Minister, Nicola Willis, presented the Budget 2025 on May 22, 2025. The Budget has proposed the following amendments impacting payroll:
1. Changes in Kiwisaver Contributions
It has been proposed to increase the default Kiwisaver contributions of both employees and employers from the current 3 percent to 3.5 percent, effective from April 01, 2026. This will further increase to 4 percent starting April 01, 2028, as part of a phased implementation over three years.
Additionally, it is proposed that, effective February 1, 2026, employees will have the option to reduce their Kiwisaver contribution rate to 3 percent, with employers matching this reduced rate. This opt-down will be valid for a period ranging from 3 (92 days) to 12 months, after which contributions will automatically revert to the default rate. This reduction can be applied multiple times at the employee’s discretion.
2. Extension of Employer and Government Kiwisaver Contributions to 16 and 17-year-olds
It is proposed that employees aged 16 and 17 who contribute to KiwiSaver will be eligible for both employer and government contributions, subject to meeting the relevant eligibility criteria. Government contributions will commence on July 1, 2025, while employer contributions will take effect from April 1, 2026.
3. Government KiwiSaver contributions
It is proposed that the government’s contribution to KiwiSaver be reduced from 50 cents to 25 cents for every dollar contributed by the employee annually.
Additionally, employees earning more than $180,000 in taxable income per year will no longer be eligible for government contributions.
Note: There will be no changes to government contributions for the year ending June 30, 2025. These contributions will continue to be paid in July and August 2025 at the current rate.
Mileage Rate Update 2025
A. Update
The rates set out below apply for business motor vehicle expenditure claims for the 2024-2025 income year.
Tier 1 Rate: This rate, which combines the vehicle's fixed and running costs, reflects an overall increase in vehicle running costs due to higher fuel prices. It is applicable to the business portion of the first 14,000 kilometres travelled by the vehicle in a year, including private use travel.
Tier 2 Rate: This rate covers running costs only and applies to the business portion of any travel exceeding 14,000 kilometres in a year.
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol | $1.17 cents | 37 cents |
| Diesel | $1.26 cents | 35 cents |
| Petrol hybrid | $0.86 cents | 21 cents |
| Electric | $1.08 cents | 19 cents |
Financial Year changes for FY 2025-26
A. Update
The Inland Revenue Authority has released Payroll Calculations & Business Rule specification wherein the following changes have been confirmed for the financial year 2025-26.
1. ACC Earners’ Levy
The percentage of ACC Earner’s levy has increased to 1.67% and its threshold value limit has been increased to $152,790.
2. Employer Savings Contribution Tax (ESCT)
The rates and threshold of ESCT have been revised effective from 1 April 2025,
| ESCT Existing Threshold | ESCT Revised Threshold | Rate |
|---|---|---|
| $1 - $16,800 | $0 - $18,720 | 10.5% |
| $16,801 - $57,600 | $18,721 - $64,200 | 17.5% |
| $57,601 - $84,000 | $64,201 - $93,720 | 30% |
| $84,001 - $216,000 | $93,721 – $216,000 | 33% |
| 216,001 upwards | $216,001 upwards | 39% |
3. Change in Annualization for Taxation of extra pay upon employment termination
If the extra pay includes an amount that arises from the ending of the employee’s employment, the annualized amount will now be based on the PAYE income payments from the two most recent pay periods, instead of the previous four weeks. Therefore, the tax on the extra pay is calculated based on the sum of:
- the amount of the extra pay; and
- the annualized value of the PAYE income payments for the last two pay periods before the PAYE income payment for the extra pay.
To calculate the tax, add these two values together and apply the applicable marginal tax rate to the extra pay.
The annualization calculation is as follows:
| Pay period | Calculation |
|---|---|
| Weekly | Total the two weeks and multiply by 26. |
| Fortnightly | Total the two fortnightly and multiply by 13. |
| Monthly | Total the two months and multiply the amount by 6. |
| Four-weekly | Total the two four weeks and multiply by 6.5. |
If Extra pay is paid along with the termination/End of service, this annualization method should be followed.
Changes in ACC Earner's Levy Rate and ESCT Thresholds
A. Update
Effective from April 01, 2025 the ACC Earner’s levy and its threshold limit will be increased as below
| ACC Earners Levy Rate | ACC Earners Levy Threshold |
|---|---|
| 1.67% | $152,790 |
And, the rates set out below are the New ESCT thresholds for the 2025-2026 Income year.
| New ESCT Threshold | ESCT Rate |
|---|---|
| $0 - $18,720 | 10.5% |
| $18,721 - $64,200 | 17.5% |
| $64,201 - $93,720 | 30% |
| $93,721 - $216,000 | 33% |
| $216,001 upwards | 39% |
Note: Updates to the student loan repayment rate and threshold for the 2025-2026 Income year have not yet been announced. Further details are provided once they are available.
Payroll Calculations & Business Rules Specification for the Budget 2024
A. Update
The Inland Revenue Authority released the Payroll Calculations & Business Rule specification in line with Budget 2024. The proposed changes have been confirmed for the financial year 2024-2025, effective from July 31. These changes include:
- Income Thresholds
- Independent Earner Tax Credit (IETC) Thresholds
- Changes to the calculation of the FBT alternate tax rate
Budget 2024
A. Update
Honourable Finance Minister, Nicola Willis, presented the Budget 2024 on May 30. The Budget has proposed the following changes impacting payroll:
1. Changes to personal income tax (PIT) thresholds
It has been proposed that the personal income tax thresholds be increased across all brackets, except the highest, marking the first reduction in personal income tax since 2010.
The new tax brackets are proposed to be as follows:
| Current brackets $ | New brackets $ | Rate |
|---|---|---|
| 0 – 14,000 | 0 – 15,600 | 10.5% |
| 14,001 – 48,000 | 15,601 – 53,500 | 17.5% |
| 48,001 – 70,000 | 53,501 – 78,100 | 30% |
| 70,001 – 180,000 | 78,101 – 180,000 | 33% |
| 180,001+ | 180,001+ | 39% |
2. Extending the Independent Earner Tax Credit (IETC)
It has been proposed that the Independent Earner Tax Credit (IETC) be extended to cover incomes up to $70,000 per annum. It will be available to individuals earning between $24,000 and $70,000 per annum, offering a tax credit of up to $10 per week.
Eligible individuals can receive the IETC during the year by using an appropriate tax code, or they can opt to receive it at the end of the year. Those earning between $24,000 and $66,000 per annum will receive the full credit, while entitlements for those earning between $66,001 and $70,000 will gradually decrease as income increases.
Mileage Rate Update 2024
A. Update
The rates set out below apply for business motor vehicle expenditure claims for the 2023-2024 income year.
Tier 1 Rate: This rate, which combines the vehicle's fixed and running costs, reflects an overall increase in vehicle running costs due to higher fuel prices. It is applicable to the business portion of the first 14,000 kilometres travelled by the vehicle in a year, including private use travel.
Tier 2 Rate: This rate covers running costs only and applies to the business portion of any travel exceeding 14,000 kilometres in a year.
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol or diesel | $1.04 cents | 35 cents |
| Petrol hybrid | $1.04 cents | 21 cents |
| Electric | $1.04 cents | 12 cents |
Financial year changes for FY 2024-2025
A. Update
Inland Revenue Authority has released the Payroll Calculations & Business Rule specification wherein the following changes have been confirmed for the financial year 2024-2025.
- The Accident Compensation Corporation (ACC) earners levy rate has changed to 1.60%.
- The maximum liable earnings limit for ACC earners levy has increased to NZ$142,283. If the annual income is more than the maximum limit, then ACC earners levy will be NZ$ 2276.52.
- To increase the minimum liable earnings that self-employed people pay Work and Earners' levies on to $44,250 in 2024/25
Student loan deduction rates and thresholds.
The student loan repayment threshold has increased to $24,128 for the 2024/2025 tax year.
| Pay-Cycle | Threshold Amounts (NZD) |
|---|---|
| Weekly | $ 464 |
| Fortnightly | $ 928 |
| Monthly | $ 2010.66 |
| Four Weekly | $ 1856 |
Update on Holiday Act Review
A. Update
Ministry of Business, Innovation and Employment (MBIE) of New Zealand has released an update stating that the drafting of the bill which will implement the Taskforce recommendations is in progress, will include some refinements which will be in consistent with the intent of such recommendations.
Also, MBIE have informed that the bill will not be introduced before the 2023 general election in New Zealand as they want to take the time to get the Bill right to minimize the risk of non-compliance issues and subsequent remediation processes.
Mileage Rate update 2023
A. Update
The rates set out below apply for the 2022-2023 income year for business motor vehicle expenditure claims.
The Tier 1 rate is a combination of vehicle's fixed and running costs and reflects an overall increase in vehicle running costs due to fuel prices. Tier 1 is used for the business portion of the first 14,000 kilometres travelled by the vehicle in a year. This includes private use travel as well.
The Tier 2 rate is for running costs only. It is used for the business portion of any travel over 14,000 kilometres in a year.
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol or diesel | 95 cents | 34 cents |
| Petrol hybrid | 95 cents | 20 cents |
| Electric | 95 cents | 11 cents |
Updates for 2023/2024 Tax Year
A. Update
Inland Revenue Authority has released the Payroll Calculations & Business Rule specification wherein the following changes have been confirmed for the financial year 2023-2024.
1. Accident Compensation Corporation (ACC) earner levy
- The Accident Compensation Corporation (ACC) earners levy rate has changed from 1.46% to 1.53%.
- The maximum liable earnings limit for ACC earners levy has increased from NZ$ 136,544 to NZ$139,384. If the annual income is more than the maximum limit, then ACC earners levy will be NZ$ 2132.57.
2. Student loan deduction rates and thresholds.
The student loan repayment threshold has increased to $22,828 for the 2023/2024 tax year. The above threshold has been divided according to the pay-cycle frequency as per below table:
| Pay-Cycle | Threshold Amounts (NZD) |
|---|---|
| Weekly (52) | $ 439 |
| Fortnightly (26) | $ 878 |
| Monthly (12) | $ 1902.33 |
| Four Weekly (13) | $ 1756 |
Proposed Financial year changes for FY 2023-2024
A. Update
Inland Revenue Authority has released the draft version of Payroll Calculations & Business Rule specification wherein the following changes have been proposed for the financial year 2023-2024. Please note that these changes will remain in draft until the legislation is passed on or before March 2023:
- The Accident Compensation Corporation (ACC) earners levy rate has changed from 1.46% to 1.53%.
- The maximum liable earnings limit for ACC earners levy has increased from NZ$ 136,544 to NZ$139,384. If the annual income is more than the maximum limit, then ACC earners levy will be NZ$ 2132.57.
- Student loan deduction rates and thresholds will be released in December 2022.
National Day of Mourning for Her Majesty The Queen announced as public holiday
A. Update
It has been announced that Monday September 26, 2022 will be a one off National public holiday to mark the passing of Her Majesty The Queen. The normal Public Holiday requirements under the Holidays Act and entitlements will apply.
Shop trading restrictions will not apply on this public holiday. Shops may open and apply the normal rules for employees who work on a public holiday.
Mileage Rate update
A. Update
The rates set out below apply for the 2021-2022 income year for business motor vehicle expenditure claims.
The Tier 1 rate is a combination of vehicle's fixed and running costs and reflets an overall increased in vehicle running costs due to fuel prices. Tier 1 is used for the business portion of the first 14,000 kilometres travelled by the vehicle in a year. This includes private use travel as well.
The Tier 2 rate is for running costs only. It is used for the business portion of any travel over 14,000 kilometres in a year.
| Vehicle type | Tier 1 rate per km | Tier 2 rate per km |
|---|---|---|
| Petrol or diesel | 83 cents | 31 cents |
| Petrol hybrid | 83 cents | 18 cents |
| Electric | 83 cents | 10 cents |
Cost of Living Payment updates
A. Update
In Budget 2022, Inland Revenue Department (IRD) has announced a Cost-of-Living payment up to $350 which will be paid in 3 monthly payments of around $116. The first payment will be paid on August 01, 2022.
Individuals (or employees) who earned up to $70,000 during the previous financial year (April 01, 2021 to March 31, 2022) and also not eligible on Winter Energy Payment are eligible to receive Cost-of-Living payment.
In case if an Individual (or employee) qualifies for the payment, IRD will pay it directly in their bank account provided in myIR.
Matariki public holiday
A. Update
The Government has created a new public holiday for Aotearoa by passing the Te Ture mō te Hararei Tūmatanui o Te Kāhui o Matariki / Te Kāhui o Matariki Public Holiday Act.
Matariki is an abbreviation of ‘Ngā Mata o te Ariki Tāwhirimātea’ (‘The Eyes of the God Tāwhirimātea’) and refers to a large cluster of stars, also known as the Pleiades.
The Matariki Public Holiday Bill was only the fifth dual language Bill to be introduced to the New Zealand Parliament.
The first public holiday to celebrate Matariki will be on Friday 24 June 2022.
KiwiSaver updates
A. Update
Three changes to KiwiSaver for employees and employers take effect on April 01,2022.
New ways to change KiwiSaver contribution rate:
- KiwiSaver members who make contributions through deductions from their salaries and wages have more ways to change their KiwiSaver contribution rate. It can be done either directly through the employers or through using myIR or contact their KiwiSaver scheme provider.
- If an employee changes their rate in myIR or through their KiwiSaver scheme provider, Inland Revenue (IR) will issue a notification to advise of the rate change.
Returning employer contributions
- If an employee has opted out of KiwiSaver or if there is an invalid/incorrect enrolment, any employer contributions will be offset against any amount outstanding, and the remaining balance will be refunded by IR.
Time-bar for employment information
- If it has been 4 years or more since the return was first filed, employers will no longer be able to change employment information through myIR or Gateway Services.
Gateway Employment Service
A. Update
The following changes are being made to the Gateway Employment Service (Employee Details) ‘Create’ Operation to align it with myIR.
- ‘kiwiSaverStatus’ field is being made ‘Conditional’ from ‘Required’
- If ‘EmployeeKiwiSaverEligibility’ is NE (New Employee) then kiwiSaverStatus’ is required otherwise it will be optional
- New error code 146 – ‘KiwiSaver Status Required’ will be returned when eligibility is NE and Status is not supplied.
- Employment.v2.xsd. is being updated as follows:
From: <xsd:element name="kiwiSaverStatus" type="KiwiSaverStatusType"/>
To: <xsd:element name="kiwiSaverStatus" type="KiwiSaverStatusType" minOccurs="0"/>
Proposal for New-Zealand Income Insurance Scheme
A. Update
The Government, Business New Zealand and the New Zealand Council of Trade Unions have proposed a new way of better protecting workers and the economy: a New Zealand Income Insurance Scheme.
This will support workers with 80% of their income for up to 7 months if they lose their job through no fault of their own. People will have the time and financial security to find a good job that matches their skills, needs and aspirations, or retrain for a new career.
Like ACC for accidents, the scheme will be funded by levies on wages and salaries, with both workers and employers contributing.
The key features of the proposed New Zealand Income Insurance Scheme are:
- Broad coverage for different working arrangements
- Coverage for job losses due to redundancy, layoffs and health conditions and disabilities
- A 4-week notice period and 4-week payment, at 80% of salary, from employers
- A further 6 months of financial support from the scheme, at 80% of wages or a salary
- Option to extend support for up to 12 months for training and rehabilitation
- A case management service to support people’s return to work
- Administered by ACC
- Funded by levies on wages and salaries, with both workers and employers paying an estimated 1.39% each
- Workers eligible after 6 months of levy contributions in the previous 18 months.
The scheme is only under consultation and currently open for public comments.
Pay-day filing and Gateway filing changes
A. Update
- The prior period adjustment fields in the EI (‘Prior period gross adjustments’ and ‘Prior period PAYE adjustments’) will accept negative values. However, any negative amounts entered cannot be more than the corresponding amounts in the ‘Gross earnings and/or schedular payments’ field and ‘PAYE / tax’ field for the line item i.e., the line can be reduced to zero, but not below. (Effective date: October 28, 2021)
- A Tax code line record (TED) must be included when sending an employee details line record (DED). If a TED is not included, a validation error will be returned for the file. (Effective date: February 02, 2022)
- The “Total gross earnings” and “Gross earnings and/or schedular payments” in the Employment information (return filing) should not have the value of Employee share scheme payments. (Effective date: April 01, 2022)
- The “PAYE/tax” filed at employee level details cannot be greater than the sum of gross earnings and Employee share scheme. (Effective date: April 01, 2022)
- The Child support code shall be blank in case of no child support deduction applicable or if entire child support amount as per deduction notice is deducted. Further, in case more than one variation applies, there is a priority code (lowest number with highest priority) that shall be applied. (Effective date: April 01, 2022).
Following are the codes with priority:
| Code | Description | Priority |
|---|---|---|
| C | ceased employment | 1 |
| A | Advanced payment | 2 |
| P | Protected earnings | 3 |
| S | Short term absence | 4 |
| D | Deducted previously | 5 |
| O | Other | 6 |
Proposed financial year changes for FY 2022-2023
A. Update
The cabinet has passed the following changes for the financial year 2022-2023. Please note that these changes are subject to Order in council. This will happen before March 2022.
- The Accident Compensation Corporation (ACC) earners levy rate has changed from 1.39% to 1.46%. The maximum liable earnings limit for ACC earners levy has increased from NZ$ 130,911 to NZ$136,544. If the annual income is more than the maximum limit, then ACC earners levy is NZ$ 1,993.54.
- The student loan repayment threshold has changed for FY 2022-2023. Please refer to the below table for amounts:
Pay-period Amount (NZ$) Weekly threshold $409 Fortnightly threshold $818 Monthly threshold $1,772.33 Four-weekly threshold $1,636 - There is a new option for calculating fringe benefit tax (FBT)
For the 2021-22 and later income years, a new Pooled Alternate Rate option for calculating fringe benefit tax (FBT) is proposed. Under this proposed option, employers will pay FBT at the rate of 63.93% only for those employees with all-inclusive pay of $129,681 or more. FBT will be payable at the rate of 49.25% for all employees with all-inclusive pay under $129,681. - The Secondary income and other income codes tax rates including ACC earners leavy have changed on account of change in ACC earners levy. Please refer the table below for updated rates:
Tax codes Rate (%) SB / SB SL 11.96 S / SL 18.96 SH / SH SL 31.46 ST / ST SL 34.46 SA / SA SL 40.46 NSW 11.96 EDW / CAE 18.96 ND 46.46 - The Inland Revenue Child Support has a new Deduction notice (YL0010) which would provide details about all employees who have a change to their child support amount in the coming pay-period. For WT payers, the notice may specify a percentage of the net pay to be deducted. These deductions are paid directly to Inland revenue using the customer’s IRD number and tax type NCP. When using a percentage deduction, the maximum amount that can be requested by Inland Revenue is 40% of their net pay.
COVID-19 Measures for August
A. Update
The Government has implemented support for Business following alert level changes in August 2021. Following are the supports available for Business after the announcement:
1. The Wage Subsidy Scheme (WSS)
This payment will be available nationally to help eligible businesses continue paying staff and protecting jobs. To reflect increased wage costs, the payments have been increased to $600 for full-time employees and to $359 for part-time employees. This will be open to applications from 9am on Friday 20 August 2021, with applications initially open for two weeks. Please refer the link for more details.
2. The Resurgence Support Payment (RSP)
This payment will be available to any business or organization in New Zealand that experiences at least a 30% drop in revenue or a 30% decline in capital-raising ability over a 7-day period, due to a COVID-19 alert level increase of level 2 or higher. This will be open to applications from 8am on Tuesday 24 August 2021 and will be available until one month after a nationwide return to Alert Level 1. Please refer the link for more details.
3. The Leave Support Scheme (LSS)
This payment provides a two-week lump sum payment of either $585.80 per week for full-time workers or $350 per week for part-time workers who must self-isolate and cannot work from home. The rates increase to either $600 per week for full-time workers or $359 per week for part-time workers from Tuesday 24 August 2021. Please refer the link for more details.
4. The Short-Term Absence Payment (STAP)
This payment provides a one-off (once per 30 days) payment of $350 for workers who must miss work due to a COVID-19 test and cannot work from home. The rate increases to $359 from Tuesday 24 August 2021. Please refer the link for more details.
5. The Small Business Cashflow Scheme (SBCS)
This scheme supports small to medium businesses and organizations struggling with a loss of actual revenue due to COVID-19. Applications are open until 31 December 2023. Please refer the link for more details.
6. Tax return Filing, Payments and Interest and Penalties
Filing returns ensures information about your businesses is up-to-date and accurate. It will help support any applications for the Government’s COVID-19 relief packages. Please refer the link for Tax filing matters during current levels.
Businesses that have an amount to pay can set up a repayment plan to pay it over time. This can be for amounts due now or later.
If COVID-19 has impacted your business’s ability to pay tax on time, a request can be submitted for remission of penalties and interest through myIR.
Kilometre rates for the business use of vehicles for the 2021 income year
A. Update
In accordance with s DE 12(4) the Commissioner is required to set and publish kilometre rates. These rates can be used to calculate expenditure claims for the business use of a motor vehicle. They may also be used by employers as a reasonable estimate for reimbursement of expenditure incurred by employees for the use of a private motor vehicle for business purposes.
The table of rates for the 2021 income year:
The Tier Two rate is for running costs only. Use the Tier Two rate for the business portion of any travel over 14,000 kms in a year.
| Vehicle Type | Tier 1 rate / KM | Tier 2 rate / KM |
|---|---|---|
| Petrol or Diesel | 79 cents | 27 cents |
| Petrol Hybrid | 79 cents | 16 cents |
| Electric | 79 cents | 9 cents |
Minimum sick leave entitlement to increase to Ten days
A. Update
The Parliament has passed the Holidays (Increasing Sick Leave) Amendment Bill to increase the minimum employee sick leave entitlement from 5 days to 10 days per year.
Most employees who have worked for an employer for six months or over are entitled to sick leave if they, or a dependent, are sick or injured. Currently, employees are entitled to 5 days of sick leave per year; however, from 24 July 2021 this will increase to 10 days per year.
Employees will get the extra five days when they reach their next entitlement date – either after reaching 6 months’ employment or on their sick leave entitlement anniversary (12 months after they were last entitled to sick leave).
Employees who already get 10 or more sick days a year will not be affected by this change.
The maximum amount of unused sick leave that an employee can be entitled to will remain 20 days.
Bereavement leave for Miscarriages and stillbirths
A. Update
The law change allows an employee to take up to three days’ paid bereavement leave if they or their partner experiences a miscarriage or stillbirth. People planning to have a child through surrogacy or adoption are also eligible, if the pregnancy ends by miscarriage or stillbirth.
Bereavement leave gives an employee time to grieve and to take care of matters to do with the bereavement. This can be taken at any time and for any purpose relating to the death, miscarriage or stillbirth, and does not have to be taken straight away or on consecutive days.
The existing rules on bereavement continue to apply. Employees become eligible for bereavement leave after six months.
Employees are not required to produce proof of pregnancy, miscarriage or stillbirth.
The law change does not provide bereavement leave for terminations. Depending on the circumstances, mothers may be eligible to use sick leave following a termination.
The law change is expected to take effect in the coming days, following Royal Assent.
Government accepts the Holiday Act Taskforce’s recommendation
A. Update
The Government established the Holidays Act Taskforce to suggest improvements to the Holidays Act, following a joint request from unions and employers. The Taskforce was asked to make recommendations on options for a clear and transparent set of rules for providing entitlements to, and payment for, holidays and leave.
The Taskforce made 22 recommendations which were jointly agreed to by union and business representatives. The Government has accepted the Holidays Act Taskforce’s recommendations.
The Taskforce’s changes will address the high degree of ambiguity that has made the Holidays Act difficult to understand and implement for employers. Employees will find it easier to understand their entitlements and will also benefit from some changes to leave entitlements.
Highlights of the Proposed Changes are as follows:
| Particulars | Provision | Current Act | Proposed Changes |
|---|---|---|---|
|
How holiday and leave payments are calculated |
Annual holidays payments |
Paid at the greater of: - Ordinary Weekly Pay (or average weekly earnings over last four weeks if this cannot be calculated) - Average weekly earnings over last 12 months For employees that have been on parental leave, only the average weekly earnings over last 12 months is used. |
Paid at the greater of: - Ordinary Leave Pay - Average weekly earnings over last 13 weeks - Average weekly earnings over last 52 weeks The above calculation is also used for those who have been on parental leave. Ordinary leave pay is what the employee would have earned if they had been at work on the day(s) in question. |
|
FBAPS leave payments |
Relevant Daily Pay (RDP), or Average Daily Pay over last 52 weeks (if not possible to calculate RDP or if pay varies within pay period). |
Paid at the greater of: - Ordinary Leave Pay - Average Daily Pay over the last 13 weeks |
|
|
‘Gross earnings’ definition |
Lack of clarity around what payments are included in ‘gross earnings’ (e.g. what a discretionary payment is). |
Clarifies that ‘gross earnings’ means all cash payments received, except direct reimbursements for costs incurred. |
|
|
How deduction of entitlement is calculated |
Period of annual holidays |
Annual holidays entitlement of four weeks, but lack of detail about how to determine what a week is, where it is not obvious (e.g. for an employee with variable hours and/ or pay). Employee and employer agreement about what genuinely constitutes a working week for the employee. |
Annual holidays entitlements are calculated, taken, paid and held in weeks or portions of weeks. Use hours from employment agreement or roster. If no hours are set out in employment agreement or roster, then use average hours worked over corresponding days over the previous 13 weeks. |
|
Day of FBAPS leave |
Deductions in days (but lack of certainty about how to determine if a day is an Otherwise Working Day). |
Deductions in days or part-days (sick and family violence leave can be taken in units of less than a day, at a minimum of a ¼ of a day). Detailed formula for determining an Otherwise Working Day |
|
|
Taking annual holidays in advance |
Employees become entitled to four weeks’ holidays after 12 months continuous employment. The Act does not specifically provide for leave in advance (i.e. it is at the discretion of the employer). |
Employees become entitled to four weeks’ holidays after 12 months continuous employment, but can take leave in advance on a pro-rata basis (e.g. could take two weeks’ leave after working for six months). |
|
|
Eligibility for FBAPS |
Employees are eligible for sick, bereavement and family violence leave after six months’ continuous employment or if they meet an hours test after six months. Employees can get three days bereavement leave if their spouse or partner, parent, child, sibling, grandparent, grandchild, or spouse or partner’s parent dies. |
Bereavement leave and family violence leave are available from day one, and three days bereavement leave is available to cover more family members. One day’s sick leave is available from the first day of employment, with an additional day per month of employment until the full five-day entitlement is reached. The Select Committee is currently considering legislation to extend sick leave to from five to 10 days per year. |
|
|
Pay-as-you-go (PAYG) |
There is confusion as to what ‘intermittent or irregular’ means in relation to employees being eligible to receive annual holiday pay with their pay (instead of being entitled to take paid time off). |
Clearer definition of what ‘intermittent or irregular’ means, and employers required to review PAYG employees every 13 weeks to check eligibility for PAYG. Also removes the ability to pay PAYG for employees on fixed term contracts of less than 12 months. |
|
The Holidays Act is highly complex, and affects all employees and employers across the country. The Government has begun further detailed policy design work to implement these changes. The Government expects to have introduced legislation by early 2022, which will go through the full parliamentary process. Businesses and employers will be given plenty of time and guidance to prepare for these changes.
Financial Year change for 2021-2022
A. Update
1. Tax Threshold and new rate change
With the enactment of the Taxation (Income Tax Rate and Other Amendments) Act 2020 a new top personal income tax rate of 39% applies for FY 2021–22 and later income years on annual personal income that exceeds $180,000, as well as changes to ensure that the new rate applies consistently across other personal tax system. The New tax codes are as follows:
| New Tax Code | Description | Tax rate | Earners levy | Total Tax rate |
|---|---|---|---|---|
| SA | Secondary income *> $180,000. | 39% | 1.39% | 40.39% |
| SA SL | Secondary income *> $180,000 with student loan | 39% | 1.39% | 40.39% |
| From Amount (NZD) | To Amount (NZD) | Rate (%) |
|---|---|---|
| $0 | $14,000 | 10.5% |
| $14,000.01 | $48,000 | 17.5% |
| $48,000.01 | $70,000 | 30% |
| $70,000.01 | $180,000 | 33% |
| $180,000.01 | $999,999,999 | 39% |
Following are the changes in the Old tax codes:
- a) ST - Secondary income * $70,001 to $180,000. Change in Threshold limit.
- b) ST SL - Secondary income * $70,001 to $180,000 with student Loan. Change in Threshold Limit.
- c) M, M SL, ME, ME SL - If annual income is between $70,001 and $180,000 inclusive, multiply annual income by 33% and subtract $9,080 and If annual income is greater than $180,000 multiply annual income by 39% and subtract $19,880.
- d) Extra pay (Lump Sum) - Primary Income and Secondary Income - The Employee can elect a higher rate to be deducted at the rate of 39% now. Refer table above for thresholds.
- e) Three tax codes have been removed - SLCIR, SLBOR and ESS. This is now shown separately in the Employee and return filing details.
2. Student loan deduction rates and thresholds.
The student loan repayment threshold has increased to $20,280 for the 2021/22 tax year.
| Pay-Cycle | Threshold Amounts (NZD) |
|---|---|
| Weekly | $ 390 |
| Fortnightly | $ 780 |
| Monthly | $ 1690 |
| Four Weekly | $ 1560 |
The maximum rate will be 5% on gross income (over the pay period repayment threshold) for primary employment earnings.
For secondary income this will be 5% on the gross payment of salary or wages.
3. There is a change in the Employer Superannuation Contribution Tax (ESCT) rate and threshold amounts:
| From Amount (NZD) | To Amount (NZD) | Rate (%) |
|---|---|---|
| $1 | $16,800 | 10.5% |
| $16,801 | $57,600 | 17.5% |
| $57,601 | $84,000 | 30% |
| $84,001 | $216,000 | 33% |
| $216,001 | $999,999,999 | 39% |
4. Pay-day Filing
- From April 01, 2021 - the Employee Details file format with the header record indicator of HED will no longer be accepted.
- For files with a payday of April 01, 2021or later, the Employment Information file format with the header record indicator of HEI will not be accepted. The updated version of the Employment Information file format (header record indicator HEI2) must be used.
- From April 01, 2021, the KiwiSaver Employment Details (KS1) form will no longer be Older version reports can be amended only using the older version.accepted. All details previously provided via this form should now be provided by using the HED2 version of the Employee Details file. The KED form is also no longer available for use.
- Older version reports can be amended only using the older version.
Change in Kilometer (KM) Reimbursement Rates for FY 2019-2020
A. Update
There is a change in Kilometer rate claim amount based on Tier 1 and Tier 2 from financial year 2019-2020 onwards.
| Vehicle Type | Tier 1 rate / KM | Tier 2 rate / KM |
|---|---|---|
| Petrol or Diesel | 82 cents | 28 cents |
| Petrol Hybrid | 82 cents | 17 cents |
| Electric | 82 cents | 9 cents |
If the return has already been filed ( FY 2019-2020) employee / employer can contact IRD for reassessment.
Change in Parental Leave entitlement
A. Update
- Keeping in Touch days for employees have increased from 52 hours to 64 hours over the duration of their paid parental leave.
- The duration of primary carers leave has increased from 22 weeks to 26 weeks.
COVID 19 – Wage SubsidyCovid-19
A. Update
Following are the highlights of the wage subsidy for COVID 19:
Eligibility
- a. All New Zealand employers who have been adversely affected by COVID-19 shall be eligible provided they qualify the below criteria:
- business is registered and operating in New Zealand
- Employees are legally working in New Zealand, including employees who:- have a NZ work visa
- have a condition on their NZ temporary visa that allows them to work in NZ
- are international students whose visa allows them to work in NZ
- b. Business has experienced a minimum 30% decline, as per method prescribed by the authorities, and that decline should be related to COVID-19
- c. Business has taken active steps to mitigate the impact of COVID-19.
Application process
- a. Employer to apply for subsidy for employees by providing information as required by the IRD
- b. Must retain the employees named in your application for the period of the subsidy.
Amount of Subsidy
- a. The COVID-19 Wage Subsidy will be paid at a flat rate of:
- $585.80 for people working 20 hours or more per week (full-time rate)
- $350.00 for people working less than 20 hours per week (part-time rate).
- The subsidy is paid as a lump sum and covers 12 weeks per employee.
- If you work variable hours (or your employee does), you can use an average to work out what rate to apply for.- Use the average hours worked each week:
- over the last 12 months, or
- over the period of time you (or they) have been employed (if it's less than 12 months).
- If the average hours are:
- 20 or more, apply for the full-time rate
- Less than 20, apply for the part-time rate.
- Use the average hours worked each week:
Payment to Employees
- a. Employers receiving the wage subsidy should pay to such employees, named in the application, at least 80% of their usual wages or at least the subsidy rate (i.e. full-time or part-time).
- b. If your employee's usual wages are less than the subsidy, then usual wages to be paid to them.
Impact on Employees’ PAYE
- a. Your employee will need to pay tax on their wage subsidy payment as it’s paid to them as part of their normal wages. This means it’s subject to the usual employer deductions, eg, PAYE, Student Loan, KiwiSaver, Child Support etc.
- b. When calculating PAYE deductions, do not gross up the Wage Subsidy component. PAYE is deducted from the subsidy (i.e. $585.50 less PAYE, etc).
- c. You can agree with your employee the frequency at which the subsidy is paid. However, if the subsidy is being paid outside of their usual pay cycle this might have adverse tax implications for your employees such as:
- they may be taxed at the wrong rate
- it may impact Working for Families entitlements.
Changes for Financial Year 2020-2021
A. Update
Income-tax changes
- a) The ACC Earner's levy has increased from $ 1,28,470 to $1,30,911 for Employees and private domestic workers (Work and Earners’ Accounts) and self-employed people (Work and Earner’s Accounts).
- b) The maximum ACC Earner’s levy above $ 1,30,911 has been increased to $ 1,819.66.
- c) Student loan repayment threshold has been increased to $ 20,020 from $ 19,760.
- d) The student loan deduction threshold has increased as follows: weekly ($ 385), fortnightly ($ 770), monthly ($ 1,668.33) and 4-week period ($ 1,540).
Other Matters
- 1. For deductions from salary as per section 157 notice, below changes have been introduced:
- a. 10% of the amount owing as specified in the section 157 notice or
- b. 20% of gross pay (as calculated by the employer) or higher amount as per employee.
- 2. For payment of salary, validation file has been added for China Construction Bank.
Pay-day filing Changes
A. Update
1. New Employee Details (ED) File specifications
New Employee Details csv file, which include new fields for KiwiSaver eligibility, employee exempt income, KiwiSaver opt-out information and new KiwiSaver statuses.
The previous version of the ED csv file may still be used for reporting of employee details for now, however only the new version of the file will be accepted from April 01, 2021.
The new version of the Excel ED file to be used from the R4 will release in April 2020.
2. New EI and EIA file specifications
These files include new fields such as hours paid and prior period adjustments, and new fields for SLCIR, SLBOR and ESS deductions.
The previous versions of the files may still be used for reporting of payday information for now, however only the new versions of the files will be accepted from April 01, 2021.
3. Removal of Electronic Payment Schedule
As of the R4 release in April 2020, the Electronic Payment Schedule (EPS) file upload service will no longer be available.
PAYE intermediaries to use the Multi-payment option account (MPO) in order to process electronic payment schedules on behalf of their clients.
4. Removal of IR345
As of April 01, 2020, the Employer Deductions form (IR345) will no longer be available for filing.
5. Removal of PAYE Intermediaries Payroll Subsidy
The payroll subsidy, that some PAYE intermediaries have been able to apply for, will no longer be available from April 01, 2020.
6. Intermediaries must be linked to clients
As of April 01, 2020, all files submitted by intermediaries through the Tax Preparer tab will require a link to the client listed in the file for the file to be accepted and processed.
Disclaimer: The information provided on this website does not constitute any legal advice, instead, all information and materials available on this site are for general information purposes only. Browsers of this website should contact their attorney should they wish to obtain advice on any particular legal matter. While Ramco has made reasonable efforts to ensure the accuracy of the information and materials contained on this website, it does not warrant or guarantee the accuracy or completeness, either express or implied. The information and materials provided on the website are provided "as is" and "as available”.
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