The way employers report payroll information to Inland Revenue (IRD) is changing. From 1 April 2018, IRD introduced a new electronic reporting system, providing employers the option of filing payroll information every payday. From 1 April 2019, the new system will be compulsory for most employers, so it is imperative business owners get to grips with the new rules to avoid the risk of non-compliance.
Under the new payday filing system, the information must be reported every time employees are paid, which could be complex for businesses with a combination of employees paid weekly, fortnightly and monthly.
From 1 April 2019, the new system will be mandatory for any NZ employer who withholds more than $50,000 of PAYE and Employer Superannuation Contribution Tax (ESCT, e.g. Kiwisaver) per year. Paper filing will remain available for smaller entities who do not exceed this threshold, although they may also opt in.
The details submitted to IRD will remain substantially the same, with additional information required in respect of ESCT payments, the pay cycle frequency, pay period start and end dates, and the payday date. There will also be amendments to the way information is collected for new employees, allowing electronic onboarding for new starters.
IRD’s electronic system supports three ways of collecting the employment information. The most straightforward option is direct filing from compatible payroll software, bypassing the need for files to be uploaded through the ‘myIR’ system. Alternatively, information can be submitted electronically or manually through the employers online ‘myIR’ account.
Generally, payday filing will require employment information to be submitted within two working days of each payday. For a business with a combination of employees paid both monthly and fortnightly, the filing deadline will be within two working days of both the monthly and fortnightly payday. However, for IR56 taxpayers, or employers below the $50,000 threshold, the deadline will be extended to within 10 working days of each pay date, with an option to submit a single monthly report.
Despite the increased reporting frequency required by payday filing, PAYE payment dates and methods of payment will remain the same. This means employers will continue to pay PAYE monthly or twice monthly, as they currently do.
Although the increased reporting frequency may appear burdensome at first glance, there is an opportunity for payday filing to reform payroll processes, becoming an integral part of the general accounting system rather than an additional monthly task. This integration will work best for software systems that can upload directly to IRD. Some employers may need to upgrade their existing payroll systems and procedures to ensure compliance by the mandatory deadline, hence, it is important that employers start considering the impact the changes will have now.