Starting from July 31, 2024, employers in New Zealand need to take several steps to comply with the new personal income tax threshold changes:
1. Update Payroll Systems
Most payroll systems should have updated automatically. However, it is advisable to check with your payroll supplier to ensure your software reflects the new tax thresholds. This will help in accurately calculating the tax to be deducted from employees’ salaries. If you file payroll manually, please ensure you are using the updated IRD PAYE calculator for the new tax thresholds.
2. Review Employees’ Tax Codes
This is an excellent time to review your employees’ tax codes and make any necessary adjustments to stay compliant.
- M Tax Code: Anyone on an M tax code will have their tax calculated according to the new tax brackets.
- ME Tax Code: The eligibility for the Independent Earner Tax Credit (IETC) has increased from $48,000 to $70,000. If your employee is eligible, you may need to update their tax code from M to ME.
- Secondary Tax Codes and Resident Withholding Tax (RWT): Employees using secondary tax codes or with investment income should check if their tax codes need updating. If your employee uses a secondary tax code, they should verify if their yearly PAYE income payments fall within the new threshold.
Employers should assist employees in making these changes if necessary. You can find the link to the new tax code declaration form here.
3. Automatic Payments
If you have set up automatic payments for employees on salaries, please ensure they are updated with the correct net amount.
4. Review Benefits and Deductions
Reassess any benefits and deductions to ensure they align with the new tax thresholds and rates.
5. Compliance
Ensure all payroll processes comply with the new regulations to avoid any penalties or issues with tax authorities.
Be more successful with Sidekick. Reach out to our expert team and let’s take your business to the next level!
