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03-11-2021

The Definitive Guide to Payday Filing in NZ

Inland Revenue has made some changes to their processes in 2019, and if you’re involved in your organisation’s payroll, you'll need to be aware of them. We'll take you through what has changed.
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We have a simple Payday Filing solution for your business. Click here for more details and sign up to Smartly today.

 

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 need to adapt their current payroll processes to support payday filing. Get organised and make sure you update your payroll processes so your business doesn’t get penalised.

What is payday reporting/filing?

 

Under the previous PAYE system, employers must have filed all employee earnings and PAYE information with Inland Revenue each calendar month. This was completed monthly regardless of the pay schedule the employee was on; weekly, fortnightly or monthly. The employer was 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 was due by the 20th of the following month. If employers filed employment information every payday, (as opposed to the mandatory monthly filing rhythm) they were doing so voluntarily.

 

This system meant 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.

Payday filing

What changes have been made to payday reporting/filing?

 

The new payroll legislation changes have made payday filing every payday compulsory for all employers from 1 April 2019. Employers who have staff on weekly or fortnightly pay schedules now 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 are 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 are also accessible online.

 

Depending on your annual PAYE and ESCT deductions amount, employers either need to file electronically or by paper.

  • 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 Smartly Customers

 

For most Smartly 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 with 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 post 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.

To summarise

Tax payday filing

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.

Be sure your business is across these new requirements. 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.

How will these payday filing requirements 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 returns 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 Smartly returns with IRD and will continue to do so. This will occur on a real-time payday basis instead of once a month. 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 changes can 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 Smartly

 

As mentioned above, if you are using Smartly 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 Smartly, 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 have created more admin and online paperwork for organisations that don’t use payroll software. Employers are currently required to submit their payroll information to Inland Revenue 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 these requirements are impacting your current payroll processes. Assess where you can make your current payroll infrastructure more efficient.

part-time workers

If you are not using Smartly to run your pays and file your schedules with IRD

 

There are some important things you’ll need to be aware of. 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

How can Smartly help?

 

The new reporting framework is already integrated into Smartly's existing payroll software and our system is fully compliant with payday reporting.

We have worked collaboratively with other payroll software companies and Inland Revenue to define and understand all the requirements for payday reporting. We have carefully tested all our processes. 

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?

Get Smartly today! Get in touch with our expert team.

 

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