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Employers

How do you think rate changes should be dealt with?

Occasionally the Government changes tax rates or rates of other deductions or payments made by employers (such as KiwiSaver and Child Support). These rate changes take effect on a variety of different dates:

Paye payments and Student loan deductions

Where the rate changes during a pay period:

and the pay period is one month or less, the new rate applies to the entire pay period

  • where the pay period is more than one month, the payment is apportioned
  • Where the payment is after a date change but relates to a period before it, the old rates apply
KiwiSaver New rates apply from the first pay period starting after 1 April.

 

 

PAYE payments

and Student loan deductions

Where the rate changes during a pay period:

and the pay period is one month or less, the new rate applies to the entire pay period
where the pay period is more than one month, the payment is apportioned

Where payment is after a date change but relates to a period before it, the old rates apply.

KiwiSaver

The Government thinks that employers’ processes would be simplified if the rules were aligned. Options are:

  • the pay date
  • the pay period end-date
  • the pay period start-date
  • apportionment

Pay date is the simplest option. However it might sometimes be inaccurate. For example, if the income tax rate changed from 30% to 20% in the middle of the year, a composite rate of 25% would apply for the entire year. An employee who was paid in arrears would have a little too much tax withheld at 20%, and if filing a return, would have a tax liability. Apportionment would deliver a more accurate result here. However, a pay date basis is more accurate where the rate change occurs at the beginning of a year.

How do you think rate changes should be dealt with?

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