PAYE changes and tax simplification

Inland Revenue (IRD) has recently released a new Taxation Bill and published the eighth discussion document in the Making Tax Simpler series; both aim to reduce the cost of tax compliance and administration for NZ businesses and individuals.

The IRD estimates that an additional $21 – $27 million of income tax revenue will be collected per annum under the new rules, and an additional 185,000 individuals will have their investment income included when determining their Working for Families entitlements, allowing calculations that are more accurate.

In summary, the proposals aim to use digital solutions to simplify the tax administration process. Both PAYE changes and the introduction of detailed reporting for investment income will give IRD more real-time information and ultimately give the Government greater insight into a taxpayer’s financial position. This will open opportunities to redesign social policies and improve the future administration of other systems such as child support, KiwiSaver, Working for Families and student loans.

IRD proposes:

  • Increasing the frequency that employers provide information to IRD from monthly to every pay day, which could be weekly or bi-monthly for some employees. This will be facilitated by the integration of accounting software with the IRD system, so that employee income and deduction information can be sent to IRD with a simple ‘push of a button’.
  • PAYE information will be sent as pay runs are processed, so payroll reporting will become an integral part of the tax process rather than a separate and additional function for employers. This will reduce the tax administration involved with employing staff and ease the compliance burden for businesses.
  • More detailed information will be collected more regularly on individuals’ investment income, such as interest, dividends, portfolio investment entity (PIE) income, taxable Māori authority distributions and royalties.
  • The payer will submit information about individuals to IRD monthly, or whenever payments are made if the payment frequency is less than a month.
  • Taxpayers will still be responsible for providing any additional information to IRD, such as rental or self- employed income. However, it will be possible for this to be provided via the online ‘MyIR’ system.

We can help you be ready to utilise these new digital solutions, please give us a call.

Published spring 2017

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