The Definitive Guide To Payday Reporting In New Zealand 2018
The Definitive Guide To Payday Reporting In New Zealand 2018
Inland Revenue has been making some changes to their processes recently, and if you’re involved in your organisation’s payroll, you are probably aware of them. New payday reporting legislation was announced in March 2018 and with it comes to some changes to how employers file employee and PAYE information to Inland Revenue. Payday filing has been optional since 1 April 2018 but will be compulsory for all New Zealand businesses that have employees with PAYE deductions from 1 April 2019. Many employers will need to adapt their current payroll processes to support payday filing. Get organised now – make sure you update your payroll processes in time so your business doesn’t get penalised.
What is payday reporting/filing?
Under the current PAYE system, employers must file all employee earnings and PAYE information with Inland Revenue each calendar month. This is completed monthly regardless of the pay schedule the employee is on; weekly, fortnightly or monthly. The employer is also required to file information on who was paid, how much they earnt in that period and the tax, student loan and Kiwisaver contributions made to Inland Revenue. This is due by the 20th of the following month. If employers file employment information every payday, (as opposed to the mandatory monthly filing rhythm) they currently do so voluntarily.
This system means Inland Revenue could be waiting up to fifty days to get pay and employment information from the employer. This is not ideal, as issues such as using an incorrect tax code or making inadequate student loan contributions can take a while to correct once they have been entered into the system and processed.
What changes have been made to payday reporting/filing?
The new payroll legislation changes will make payday filing every payday compulsory for all employers from 1 April 2019. Employers who have staff on weekly or fortnightly pay schedules will have to do this filing on a weekly or fortnightly basis. Payday filing will give Inland Revenue information on the day the payments are made, ensuring their systems are as up to date as possible.
Payday filing requires the employer to complete an online form, which provides Inland Revenue with the following information:
- The pay details of your employees and pay cycle
- Information on new and departing employees; start/end date, contact details and date of birth – this should be filed before the employees’ first payday.
Employers will be able to correct employment information online, rather than completing an employer monthly schedule amendments form (IR344). Inland Revenue still won’t be able to accept negative adjustments. To make entering the correct information easier for employers when new employees are hired, paper IR330 and KiwiSaver deduction forms for new employees will also be accessible online.
Depending on your annual PAYE and ESCT deductions amount, employers will either need to file electronically or by paper. If you choose to opt in prior to 1 April 2019, you will need to file electronically.
- File electronically if these deductions are $50,000 or more. This will need to be filed within two working days after the employees’ payday.
*Anyone who files their PAYE as an IR56 taxpayer will have 10 working days after payday to file the required information.
- File by paper if these deductions are below $50,000. Employers filing by paper will have 10 working days following payday or the 15th of each month (if the information is sent twice a month).
For Smart Payroll Customers
For most Smart Payroll customers, we look after the Employer Monthly Schedule (EMS) filing requirements, meaning PAYE information is filed each month automatically. Companies that already use payroll software that automatically files returns for you, should not notice any major changes to how pay runs are processed following these changes. Most providers will update their software to accommodate the new process. Depending on your software provider, you may notice slight changes to the layout or software interface.
All payroll software should be compliant with payday reporting requirements from 1 April 2019. Payroll software will ensure these changes are seamless and should take care of most of the admin for you. Inland Revenue has penalties for non-compliant companies who file their information late, or manually. The non-compliant software could put your company at risk. If you have any concerns, contact your payroll software company and check they’re taking the correct steps towards being compliant by 1 April 2019.
When do you pay PAYE?
It’s important to note that payday reporting is only related to reporting earnings and PAYE information each payday to Inland Revenue. No changes will occur to the dates on which tax payments are due. These dates will remain the same – either once or twice a month depending on whether your business is withholding less or greater than $500,000 per year. Employers may choose to make payments on a more frequent basis, but this remains optional. Therefore, employers will be completing the required form on a more regular basis, but not making tax payments to Inland Revenue any differently.
|Current process||Payday filing/reporting process from 1 April 2019|
|Information is sent to Inland Revenue manually or by uploading data online.||Payroll information is filed directly to Inland Revenue either via payroll software or online.|
|To file PAYE online: $100,000 threshold||To file PAYE online: $50,000 threshold|
|Timing: once a month||Timing: every payday|
|EMS needs to be completed monthly||No EMS required|
|New employee forms – IR330 (tax code declaration) and KS2 (KiwiSaver deduction) manually filled in and sent to Inland Revenue.||Online form which combines the KS2 and IR330 forms.|
Why is payday filing important?
Payday filing streamlines the payroll reporting process and provides real-time information to IRD, which informs government social policy. Furthermore, payday filing each payday ensures payroll errors are detected early. The new process will enable businesses to amend payday issues with just a click of a button.
When do you need to comply?
All New Zealand employers must be compliant with the new payday filing by 1 April 2019. Payday filing became optional from 1 April 2018, but businesses aren’t required to comply until the cut off date.
We recommend all employers pre-empt these changes and ensure business practices align with the new requirements ahead of the cut-off date. For companies that opt-in prior to 1 April 2019, there is no option to revert back to previous procedures. Be sure your business is ready to cope with these changes before you opt-in. This is particularly important for companies that do not use payroll software, as these changes will increase the paperwork and admin involved when processing paydays. Updating procedures can be a time-consuming task. Get started now while there’s time to spare.
How will these payday filing changes affect you?
The extent to which the payday filing changes affect your company will depend on whether or not your company uses payroll software that files return automatically. If you do not currently use payroll software, assess if payroll software is a good and timely investment for your business.
Datacom files all SmartPayroll returns with IRD and will continue to do so. This will occur on a real-time payday basis instead of once a month. If you have been filing your Employer Monthly Schedule (EMS) manually, it could be beneficial to file the EMS electronically before payday reporting comes into effect. Chat to someone from our team if you’d like to discuss anything about your current subscription.
Do you need payroll software to be compliant with payday reporting requirements?
Payroll software is not necessary to be compliant with payday reporting changes. The new process can be actioned with or without software. Employers should be aware of how the upcoming changes will affect their company, regardless of if you use payroll software or not. But, bear in mind that software that files return automatically will take care of the majority of the changes for you, making the transition a lot easier.
Changes for companies using Smart Payroll
As mentioned above, if you are using Smart Payroll we will take care of payday reporting / filing for you – you don’t need to do anything to be compliant.
If you are not with Smart Payroll, check your payroll software is compliant, as non-compliant software could put your company at risk.
Changes for companies without payroll software
In order for organisations to remain compliant and retain efficiencies in business operations, investment in a payroll system could be a crucial business tool. The legislation changes will create more admin and online paperwork for organisations that don’t use payroll software. At present, employers only need to worry about submitting their payroll information to Inland Revenue once a month, but will soon be required to increase this to align with their employee pay cycle. This results in more time required of the person who processes payroll at your company. If your company is in this position, we recommend reviewing how the upcoming changes will impact your current payroll processes. Assess where you can make your current payroll infrastructure more efficient.
What happens once you’ve opted into the new method of payday filing?
Once your company has opted into payday filing, the new process will commence the month after you opt-in. From this point, employment information will need to be filed online within two days of each payday. What happens once you have opted in is slightly different for companies using payroll software and companies that do not.
The process will be automatic for companies that use SmartPayroll to file their returns and there is no need to opt into payday filing. SmartPayroll will switch our clients over to payday filing when it’s required.
If you are not using SmartPayroll to run your pays and file your monthly schedules with IRD
There are some important changes you’ll need to be aware of, once you’ve opted in. Employers will need to:
- Give others access to the payroll returns account
- Complete and file the Employer monthly schedule (IR348) form for the month passed
- Complete and file the Employment deductions form (IR345)
- Make payment for the IR348 form by the due date
- File employment information each payday to Inland Revenue
- Submit details for new employees before their first payday to Inland Revenue
- Submit details for departing employees to Inland Revenue
The information currently supplied in the IR348 form will remain, however there will be extra information you need to provide as well. Your employment information file will also contain the following:
- Employer Superannuation Contribution Tax (ESCT) for each employee
- The pay period start and end dates
- The pay cycle for that employee, such as weekly, fortnightly or monthly
- The employees’ payday date
- Any extra information about new and departing employees
What is SmartPayroll doing to get ready?
The new reporting framework will be integrated into Smart Payroll’s existing payroll software to avoid any disruption to our customers. Our system will be compliant with payday reporting before 1 April 2019.
We have been working collaboratively with other payroll software companies and Inland Revenue to define and understand all the requirements for payday reporting. To minimise any risks to our customers, we have chosen not to implement optional payday reporting from 1 April 2018. We’re carefully testing all our processes and will manage a controlled and staggered migration to the new reporting framework. This ensures any issues that arise can be identified and fixed before it’s compulsory to make the switch. Given the additional admin involved with regular payday filing, the small percentage of our clients who opt to file their own IRD returns may choose to change to the full service before 1 April 2019.
Now is a perfect time to start using payroll software if your company doesn’t already. Why deal with the increased admin and time involved in complying with these changes? Get SmartPayroll today and we will help you get ready for the payday reporting changes.