PAYE — business.govt.nz

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PAYE

Employees earning a wage or salary are taxed directly from their pay. This is known as PAYE (pay as you earn).  As an employer, you're responsible for deducting and paying PAYE income tax on your employees' behalf.

Each pay period you need to calculate and deduct PAYE. Each payday you send Inland Revenue the pay details for your employees. You also need to provide employee details, like start and end date, contact details and date of birth, for new and departing employees. This is called payday filing, and you can do all of this directly from your accounting software (if it’s been enabled to do payday filing), online through Inland Revenue’s myIR service or with paper, using new forms if your annual PAYE is less than $50,000 or you’re a new employer.

PAYE is pretty straightforward once you're set up. But different rules can apply to some payments, eg lump sum payments like bonuses or retirement payouts, or to special types of workers. If you're at all unsure of what you need to do, speak to Inland Revenue or a tax advisor.

The way you file payroll information with Inland Revenue has changed. Payday filing started 1 April 2019.

The way you file payroll information with Inland Revenue has changed. Payday filing started 1 April 2019.

You don’t need to file an Employer Monthly Schedule (old IR348 form) – also known as an EMS – or an Employer deductions (IR345). These have been replaced by payday filing.

Payday filing (external link) — Inland Revenue

Find out what you know about tax types and levies for businesses and the self-employed. When you’re done, follow the links in the answers for more details.

The amount of PAYE you deduct depends on the employee’s tax code and how much they earn. To work out what you need to deduct, use Inland Revenue's PAYE/KiwiSaver deductions calculator (external link) .

If you pay out holiday pay at 8% of annual income, use Inland Revenue's tax on holiday pay calculator (external link) .

Filing returns

The easiest way to file your PAYE returns is to use your accounting software, you can also use Inland Revenue’s online myIR service (you have to file this way if you pay more than $50,000 a year in PAYE and employer superannuation contribution tax).

If you use myIR to file and pay PAYE, your business can also offer your employees payroll giving — where they can donate money from their pay towards a charity approved by Inland Revenue.

Payroll giving (external link) — Inland Revenue

If you've made a mistake

You can correct a mistake in employment information you’ve already filed. This can be done online using Inland Revenue’s online myIR service, by paper or by phone. If you file directly through accounting software or a payroll company, you may be able to do this through the software.

Avoid these common PAYE pitfalls:

  • Getting the calculations wrong — getting it right is important both for you and your employee. Use Inland Revenue's calculators to check.
  • Not contacting Inland Revenue immediately if you realise you've made a mistake — it can usually be corrected pretty easily.
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