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Integrate PAYE into payroll software

Should payroll software be used to send information about PAYE income and deductions to Inland Revenue when staff are paid?

At the moment employers are required to provide PAYE information on a monthly basis, regardless of their pay cycle. When PAYE compliance is facilitated by payroll software, this information could be provided on a pay period basis, rather than monthly. This would eliminate the current need for employers to aggregate information from each pay cycle in each month, which creates additional work and an opportunity for error. Submission of information on a pay period basis would eliminate the need to file an employee monthly schedule.

For employers already using payroll software and “file transfer” to submit their employer monthly schedule information digital submission of data from within a payroll system at the time the payroll is finalised, would eliminate the steps of saving the file of PAYE information, logging into ir-File through my IR and sending the employer monthly schedule to Inland Revenue.

Question

If your payroll software could be used to send payroll information to Inland Revenue at the time staff are paid would it increase or reduce your compliance costs?  If you can quantify the effect please do so.

Comments

Common Sense
We are a very small employer (6 staff in total), use a very basic payroll software system and our PAYE deductions from employees for a year just exceed $50,000. We are very happy with the way things are at the moment and definitely oppose any change whatsoever. There is no issue as the document suggests with aggregating information from one payday to the next in a monthly cycle - the payroll software does this for us. Further, submitting details to the IRD every time we have a pay day will substantially increase our compliance costs - the software developer will increase their charges and then there is staff time involved in providing the information to IRD. In any month we have either 4 or 5 pays as our staff are paid weekly and doing this exercise 4 or 5 times a month is just plain ludicrous.

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8 months ago
Paula McErlane
Not interested in changing the PAYE system unless IRD are completely up to date. As it is, the company had complete control over their returns and payments. In the proposed system control is given to IRD.

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8 months ago
Gill Fisher
We are a very small partnership, often with no employees as such. Having to get payroll software would be completely unacceptable. I use an excel spreadsheet. It is perfectly adequate and I already electronically pay GST. If/when we do have an employee, it's very easy to keep track of wages on a spreadsheet. I tried to pay PAYE electronically via your website last year, but got so confused by that process I gave up and reverted to your monthly schedules. If we must pay electronically, make it easier, and certainly not weekly. Cashflow for us is our biggest problem.

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8 months ago
Nathan Veysey
I think allowing it from payroll software is a good idea, provided that current systems to operate as they are. Our accounting software is custom, having to navigate through API documentation to extend the software, or install a compatible third-party tool would be a nuisance and extra cost+time to our business - that would provide little or no benefit to us.

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7 months ago
HP Print
Alignment with existing accounting software is fantastic.Intergation will save time,reduce complaince costs . Reduce queries etc.

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8 months ago
Lance
I have one employee so have not perceived much value in buying payroll software (I do have accounting software for GST, involving etc). Anything that means employers 'must' have payroll software is likely to add compliance costs.

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6 months ago
Mandy Cashman
I have some issues with regard to PAYE and getting information from the payroll system insofar, as a small business with staff that are all on salary, the need to to the payroll every fortnight is not as pressing (or more to the point remembering to do it) and that could be a problem. However, I do like the idea of all information being taken in real time, though I would have thought for the IRD this would be problematic particularly if payroll is done weekly or fortnightly. How would payments work as well, would they be in real time i.e. each payroll run or at the end of the month or the month following as it is now? I agree that the information in the payroll program should populate the IRD programs so that there are no errors in tax rates, names or IRD numbers, etc.

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8 months ago
Rebecca
Once a new system is embedded which makes it compulsory to pay PAYE at the time of processing payroll, there will be no going back. Just imagine, in the longer term, when interest rates have risen again, what the loss of interest income on the funds held back for PAYE might be to organisations all to the financial benefit of the IRD.

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8 months ago
Sophia
More complicated. Not agree.

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8 months ago
Bernadette
It would reduce my time without a doubt... I often forget to do the monthly return... if it could just happen automatically (or be another step in the process) when I pay wages that would be great... one less thing to have to do each month.

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8 months ago
Sally Gardiner
This would be fine.

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8 months ago
Sally Gardiner
This would be fine.

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8 months ago
Paul G
I don't think it should be. Monthly seems fine. We pay a lot of variable hour staff, and there are constant adjustments that happen within a pay cycle (week) before the final result is in place. We might make three payment runs that comprise a "pay period". I wouldn't want to see 100+ interactions with the IRD on these payments. 12 DED filings is enough to see on the IRD statements. Would hate to see 52-100 Student Loan payments etc across the year on our IRD statements.

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7 months ago
Jodi
Hi - my payroll software calculates this all at the time I process my pays, and my payroll sends this information through for me. it is much easier to have it all done at once!

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7 months ago
Lara Blomfield
No I don't think we should have to use software specifically. It is easy and fast to file online or in paper form. Maybe the software could be an OPTION for the companies who use accounting software but for smaller businesses and contractors who file its just another expense to add software along with time to learn and use it?

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7 months ago
Trevor Dance
Hello, A huge number of employers in NZ have less than 10 staff. SURELY the IRD can simply have an online PAYE system that calculates the tax rather than tricky interfaces that will require support when they fail. With the IRD supplied system there is no interface required. Make it really simple to use and this will not only save small businesses time but real money as they do not have to employ specialists to support it. Regards Trevor Dance Current IT Project manager who started doing payroll on kalamazoo paper back in 1977

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7 months ago
Financial Adviser
To send through PAYE at the time of payment to the client is a very logical solution. The options should be direct from software and tidying up the IRD PAYE online system to make the returns very simple and straightforward. This will result in less flow on effects for employees, less time for payroll and more transparency all around for picking up problems as they arise.

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7 months ago
Rene
Give us the option and incentivise us to pay early

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7 months ago
Keith Walls
It would be ridiculous to impose accounting software on a small one man consulting business such as the one I run. I only need to have a small cashbook for the amount of accounting entries I need to make manually, it would take me far longer to log on to a software package and link to IRD, not to mention the cost of the software.

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7 months ago
Eric Neal
As owner of a payroll bureau which processes pays and does IR-filing for over 40 companies, as well as assisting other companies with their payroll issues, I see this as a backward step which would not only increase our compliance costs, but I believe it would result in substantial additional costs for IRD with the need to engage many more staff to sort out IR-filing issues. Having been in the business for a long time, we make very few errors as far as PAYE is concerned, and at present nearly all of these can be remedied before the information goes to IRD. One of the biggest banes of my life is having to complete an IR344 Adjustment Form when an erroneous return has already gone to IRD. Under the proposed regime, this would become a much more common occurrence. More so with the many clients that we deal with who do their own payroll and IR-filing, and because of inadequate controls end up double-filing or making errors with PAYE. The proposed changes would provide more work for software developers and IRD staff, but they would do nothing to streamline the PAYE operations. So this proposal gets a big NO from me.

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7 months ago
Noel Reid
Eric Agree 100% re IR344s Any new system IR introduce would need to see that workload eliminated for employers

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5 months ago
Devida Hati-Ross
Happy to stick with the paper system.

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7 months ago
Kathryn Gates
As a small business with no employees but pay an honorarium, once a year, payroll software would not be cost effective. Preferably if only paying PAYE once a year, would like to only file once a year, instead of filing Nil returns monthly.

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7 months ago
Matt
I think it is a great idea to submit PAYE information immediately on having made the payment to the employee, whether it is weekly, fortnightly or monthly. If an employee is injured and off work, they expect to get paid weekly compensation by ACC. So if this PAYE information is available immediately to IRD as well as to ACC, then it makes assessment of the weekly compensation quicker to the injured person. As such, I think this is a win-win situation for businesses, employees, IRD, ACC and any other organization dependent on this information.

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7 months ago
Lance
A potential problem is that the person preparing paye returns may not be on site on every pay day or have time each pay day to do the necessary completion of forms etc. Wages are often paid by automatic payment meaning the 'pay clerk' (often the owner of a small business) does have to be on site each pay day. Having to file paye each pay day will add to costs.

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6 months ago
Cherie Byrne
The current online filing system with IRD works well, especially for small business. No extra software to purchase which would be just another cost for small business particularly, to have to accommodate.

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6 months ago
admindarn
I have no objections to the information being passed on directly to IRD weekly, but it seems most of these questions and potential changes appear suitable for large organisations with staff trained and able to take over when someone is away or sick. I teach someone to do the basics, but compliance and checking etc is up to me and I don't feel I should employ an extra person to be around if I happen to be sick or on holiday

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6 months ago
Warwick McArthur
I don't agree with the proposal - I think that the interface into IRD needs to be simplified, but the current system works well for us. We run multi payrolls each week and if the proposal does go ahead I believe that our increased compliance will be significant. I can see adjustments being a nightmare - at least we can (and do) check the reports before submitting to IRD. There is a huge cashflow benefit for IRD - but minimal benefit for anyone else.

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6 months ago
Jo
We are a small business not currently using payroll software - only two employees paid weekly. It would be an increased compliance cost if we had to get payroll software for no other reason than to submit payroll information to IRD. If the reporting method was optional and we could stay as we are (as the cost of payroll software was unjustified), but there was a change in reporting PAYE each pay period, then it would be onerous to remain on a weekly pay period and we would need to consider moving to a monthly pay cycle. It wold be a tough ask on employees earning just above minimum wage to move to a monthly pay period in order to make PAYE compliance more manageable. Having said that, if we were a larger business with many employees and payroll software was warranted, then an automated system would most likely appeal.

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6 months ago
Mario Becroft
This option should be available. It should be done using standard B2B interfaces that are documented and can be implemented easily by anyone using industry-standard data formats and processes such as JSON and HTTP/REST. Then accounting software vendors are free to support it, and any individual with a customised accounting system can also make use of the same interface.

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6 months ago
Nikki
In the UK payroll systems automatically send the PAYE information to the IRD as part of the payroll process (it's just one more button to click). They also produce the file for the payment of the correct PAYE on 20th each month which is automatically loaded into your bank account for authorisation and the journal posts from the payroll system to the accounts system. Here the process as it stands is very long winded and timely.

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6 months ago
Anne
Very interesting comments for and against the changes. I work for a company that provides a payroll service for clients using various payroll providers that best fit our client's individual needs. I am all for reducing compliance costs for businesses but I think the Government needs to look at the complicated payroll legislation that we have in NZ first. We have so many different types of pay calculations for annual leave, sick leave, bereavement leave, public holidays with ordinary daily pay, 52 week average, annual average and 4 weekly average under the Holidays Act 2003. And the calculations for KiwiSaver with net contributions and ESCT! Very few other countries have such complicated methods of payment in payroll! How are small business owners suppose to understand it all! The KiwiSaver 'opt out' requirements need to be changed too so an employee can opt out on start date. The time and cost involved to get the contributions/deductions back from the Government are hefty, and totally unnecessary. If a person doesn't want to be in KiwiSaver then that's it. Don't try to trick them by deducting it for a few weeks hoping that they will forget about it and end up having to stay in. Employers should not have to be in charge of an employee's financials! Streamlining some legislative requirements first of all would reduce compliance costs for employers. Most small businesses aren't completing payrolls correctly for their employees because it is so complicated, but they often can't afford to out-source. We often pick up new clients who are despairing, their payroll is in a mess, they haven't made correct deductions, missed payments to the IRD and it takes so much time to fix everything. Then IRD staff have to spend time fixing those mistakes too. I am all for integration with IRD and payroll software but it must remain optional so small businesses can continue under the systems that they are familiar with that work best for them. Let's get the Government addressing payroll legislation first in consultation with payroll software providers, payroll practitioners and the NZPPA - Payroll Practitioners Association for their expertise.

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6 months ago
Warwick
I couldn't agree more - I think that you have nailed it

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6 months ago
Noel Reid
Really good! Maybe you should be part of an IR advisory panel Anne In terms of all the tax calculations, my understanding is that IR is aiming to tax "more and more" of those as part of current year earnings. So the solution is Annualised Tax calcs. At a seminar, I asked IR why did they ever get involved in Kiwisaver collections? After all, they don't get involved with other super schemes. And the costs imposed on employers by the delayed "opt out" should be recognised...

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5 months ago
Jac
No. We are a small business and do not use an off the shelf accounting package; nor do we intend to purchase one. For us, the current process is suitable the way it is.

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6 months ago
Susan
Not everyone can afford or wants to have electronic payroll systems, so we need to ensure a manual option of recording deductions is still available.

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5 months ago
Angus Ogilvie
I believe this proposal increases compliance although may be beneficial for SME cash flows. The Australian BAS system where PAYG is returned with GST may be worthy of consideration. They do this quarterly although there is no reason why this could not be done bi-monthly in the New Zealand context.

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5 months ago
Leigh
Having to submit to the IRD PAYE every time a business does a pay run will increase compliance costs rather than decrease them – currently we only have to reconcile/check the PAYE submitted once a month to have to do this per pay changes the task for reconciling from once a month to a once a week task taking more admin staff time.

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5 months ago
Leigh
The threshold of $50,000 a year PAYE is way to low – this will then force small business that have 1 to 3 employees to have to file electronically where it is a lot similar for these people to file as they do now. The Threshold should go up not down. If PAYE was to be filed at the time the payroll is run the IRD would have to allow for a negative PAYE return to be processed for those instances where an employee has been over taxed in one pay run but an adjustment run is then processed to correct the over deduction resulting in the secondary pay being a negative PAYE posting.

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5 months ago
Noel Reid
A great idea if implemented properly. In particular, Payroll Adjustments would need particular attention, to ensure the full benefits are obtained from the automated process. To achieve this outcome, payroll systems may need to be "authorised" to grant tax refunds in Overpayment situations.

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5 months ago
Barry Evans
For years the Payroll software we use has produced the reports required for IRD , which have then to be copied manually into the respective IRD form (initially paper based, now electronic). It seems a very small step to have software providers submit their Payroll reporting formats to IRD for approval or licencing, to then allow businesses to submit automatically (electronically) from the Payroll software. Previously, as a small business owner, I managed my payroll using an Excel spreadsheet. It is important that this option is also retained to allow small business owners a low cost option and thereby reduce the opportunity for the "licenced software providers" to increase their charges unnecessarily.

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5 months ago
Maree Trilford
We have up to 70 staff with 3 different payroll periods. Very happy with one paye payment which incorporates the 3 payroll periods. Having to pay a month earlier for 3 different payrolls would impact on our cashflow and I am sure others that have to wait to the 20th for payments. Especially when we forecast our cashflow inline with payments received. Do no want any change to current process.

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5 months ago
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