There are also some components that are not changing until 1^st April 2025.

Extra Pays.

Calculating extra pay will still use present tax thresholds and won’t change until 1^st April 2025.

Employees may question this, as they may expect less tax to pay. So be prepared to answer why this has not changed.

Use what IRD has stated;

• Using the new thresholds may create underpayment of tax.
• Any issues will be sorted out at the end of year assessment (square-up)

Extra pays include Annual Leave cash ups, Annual & Special bonuses, back pay and lump sum holiday pays (Annual leave paid in advance/beginning of leave period)

Employer Super Contribution Tax (ESCT)

• This will not change on 31 July 2024.
• It will change on 1 April 2025 to reflect personal income tax threshold increase.

What to tell Employees.

• Be proactive, rather than reactive.
• Get information on changes to employees before 31 July so payroll does not get flooded with questions.
• Employees will be looking for additional money, so will question any payment they believe should have been taxed at a lower rate with the new thresholds (such as extra pays, as already addressed in this notice)
  • As an example, if you have an annual bonus paid to employees after 31 July 2024, provide employees with information on how this is taxed.
• Use IRD references as much as possible, to back up what you are doing.

Link to IRD – Personal Income Tax Changes

https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-rates-for-individuals

Employee needing to change their tax code.

• The employee must decide if they need to change their tax code based on the changes that will occur on 31 July 2024.

Unless

• Payroll or the employer receives instruction from IRD.
• Payroll and/or the Employer must not involve themselves in advising an employee what tax code they should be using.
• Payroll and/or the Employer must not act as a financial advisor for the employee. If that occurs, and the advice is not correct, it makes the employer liable for any error. Payroll and/or the Employer can only access information regarding what they pay to the employee, so it is not possible to know all their personal financial information

If the employee asks for help, this is what Payroll and/or the Employer can do;

• Direct them to the current IR330 and explain there is step by step guidance on that document.
• Direct them to the IRD website
  • https://www.ird.govt.nz/income-tax/income-tax-for-individuals/tax-codes-and-tax-rates-for-individuals/tax-codes-for-individuals
• Or they can call IRD directly
  • https://www.ird.govt.nz/contactus

Our payroll team have undertaken the necessary training, and have obtained the resources required to ensure accurate wage calculations, so our clients can update their payroll information and provide employees with the right information prior to the changes on 31^st July 2024.

If you are processed wages client, we will be emailing and posting wage calculations over the coming weeks. We will also be contacting our established advisory clients.

If you have not used our Payroll services in the past, and require assistance in getting this right for your employees, email us on: wages@cooperaitken.co.nz

We are happy to help!