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Extra pay day in a year

What do you think should be done in years with an extra pay day?

Sometimes an extra pay day occurs in a tax year. For example, some tax years can have 53 weekly or 27 fortnightly pay days in them. When this happens, not enough tax is deducted because calculations are based on standard years of 52 weekly or 26 fortnightly pay days. People who file returns will typically end up with an unexpected tax liability. This could become a greater problem in the future if more people are required to file returns.

This issue could be addressed if tax tables published by Inland Revenue included an option for years with extra pay days, and software used to calculate PAYE determined whether an extra pay day would occur in the year and adjusted PAYE accordingly. The approach taken in Australia is to allow employees to ask their employers to make additional deductions in years with an extra pay day.

Questions

Do you think a mechanism should be introduced for withholding extra amounts in years which have an extra pay day?

If your answer is yes, which of the following approaches do you prefer?

1.  Employers are required to deduct additional amounts from:

               a)  All of their affected employees; or
               b)  Only those affected employees who request an additional withholding; or

2.  Employers may choose whether to deduct additional amounts, and if they make this choice they will be required to deduct:

               a)  From all of their affected employees; or
               b)  Only those affected employees who request an additional withholding.

Comments

michele hunt
No - too complicated

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8 months ago
Leonie
I think for the majority of affected employees the amount of liability would be minimal so my vote is for no change.

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8 months ago
Pauline Newson
Yes 1 a

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8 months ago
Maree
Yes. 1. A.

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8 months ago
Common Sense
The extra pay rebate from yesteryear should never have been repealed some years ago. It should be reinstated to eliminate this issue for employees

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7 months ago
Mario Becroft
I do payroll monthly so as to avoid these types of problems.

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6 months ago
Noel Reid
The answer is annualised calculations!! This method, incorporated into payroll systems, would virtually eliminate so many incorrect taxation problems around a single employer (but can't help with secondary employment issues, unless IR "shared' other earning info with the main employer's payroll system.

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5 months ago
Chris Mar
I support that a mechanism be provided for withholding extra amounts in years that have an extra pay day. However, many employers would not know whether they will be affected by this anomaly given slight variations in pay days throughout the year. Hence I do not agree with making this a requirement. If an employer is aware of the anomaly then they should be given the choice to apply the extra withholding to all affected employees. This mechanism will likely be used by large employers with regular pay cycles and payroll software. For large employers, it would be impractical to canvas all employees affected and to individually make changes based on employee requests. This would greatly increase compliance costs for the employer.

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5 months ago
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