This website discusses how the administration of PAYE and GST could be improved by integrating PAYE and GST obligations into employers’ payroll and GST-registered persons’ accounting systems.
This would, as much as possible, enable taxpayers to meet their PAYE and GST obligations as part of what they would be doing anyway, rather than requiring separate tax compliance processes. This website also discusses a number of potential changes to the PAYE rules to improve workability.
The proposals recognise that some customers cannot access digital services and that others do not use payroll or accounting software.
Pay as you earn (PAYE) is a withholding tax mechanism used by New Zealand employers (and PAYE intermediaries) to deduct income tax and the ACC earners’ levy from their employee salaries and wages and pay it directly to Inland Revenue. The PAYE system is also used to collect information, and in some cases payments, for many income-related social policies including KiwiSaver, student loan repayments, some child support deductions and entitlements to things like Working for Families.
Integrating PAYE obligations into payroll software could streamline the submission of information, eliminate some processes and simplify and improve others. It would also allow PAYE information to be provided to Inland Revenue at the time the business process occurs – for example enabling information about PAYE income and deductions to be provided when staff are paid rather than in the following month.
More timely and better quality PAYE information would allow Inland Revenue to improve the quality of PAYE deductions which would in turn improve individuals' access to their social policy entitlements. Better information would also provide an opportunity for the Government to make future changes to the design and operation of social policy.
The Government is seeking feedback on:
- Proposals to simplify some PAYE processes and eliminate others.
- A proposal that employers could provide PAYE information to Inland Revenue at the time the business process occurs – three alternative options for implementing this change are outlined.
- A proposed reduction in the threshold for electronic filing of PAYE information, from $100,000 per year of PAYE and employers superannuation contribution tax (ESCT) to $50,000.
- The possibility that employers should pay PAYE and related deductions to Inland Revenue at the same time as they pay their employees.
- Possible changes to a number of PAYE rules, where employers have told us the existing rules are either confusing or unduly complex.
Goods and Services Tax (GST) is central to New Zealand’s tax system, and accounts for 32% of total tax revenue.
The Government considers GST is working well overall, and the simplicity of New Zealand’s GST is seen as a model internationally, although it is worth noting that consultation has recently concluded on new rules that would apply to cross-border services and intangibles. The Government does not propose any change to when GST returns and payments are due. However, as with the other areas considered in this consultation, the Government is keen to reduce the costs faced by those who need to meet GST obligations.
The Government is therefore seeking feedback on:
- The proposal that GST-registered persons could, once they authorised the information, provide direct feeds of GST information to Inland Revenue from their business accounting systems. This has the potential to eliminate the double entry of information and the potential for transcription errors that currently exists.
- The proposal that GST refunds are only be paid by direct credit into customers’ bank accounts unless it would cause undue hardship or is not practicable.
- The possibility that some GST-registered persons should be required to submit their GST information to Inland Revenue in electronic form, through existing or new channels.
This website explains these proposals, and invites feedback. For a comprehensive explanation of these proposals, see the discussion document.