The eligibility criteria for participating in the scheme
Clause 236
Issue: Extend payroll giving to all employers
Submission
(67 – New Zealand Institute of Chartered Accountants)
Payroll giving should be made available to all employers and not just to those who file their employer monthly schedules electronically.
Comment
As mentioned previously, employers are required to electronically file their employer monthly schedules before they can participate in payroll giving. This requirement was necessary because the paper form of the employer monthly schedule could not be easily amended to capture the relevant payroll donation information. Therefore, it was not practicable to extend payroll giving to employers who file their employer monthly schedules in paper form.
Officials note that any employer with access to a computer and the internet can file electronically using Inland Revenue’s secure IR-file system. Inland Revenue provides relevant support and education to employers who choose to file their employer monthly schedules in this way.
As already noted, if an employee wishes to make a donation and their employer does not file their employer monthly schedule electronically, the employee can use the current end-of year tax credit claim process.
Recommendation
That the submission be declined.
Issue: Employers who offer payroll giving should be required to electronically file their PAYE income payment forms
Submission
(Matter raised by officials)
An amendment to the eligibility criteria in proposed section LD 4 is necessary to require employers to file their PAYE income payment forms electronically.
Comment
Like the paper form of the employer monthly schedule, there are space limitations in the paper form of the PAYE income payment form. The PAYE income payment form contains summary PAYE and other deductions information and accompanies the payment of PAYE.
Officials consider that this requirement should be part of the eligibility criteria for employers who wish to offer payroll giving to their employees.
Recommendation
That the submission be accepted.
Issue: Payroll giving should be available to people who earn income from employment
Submission
(Matter raised by officials)
An amendment to the eligibility criteria in proposed section LD 4 is necessary to clarify that people who earn income from employment are able to participate in a payroll-giving scheme.
Comment
As currently drafted, the bill would treat the Accident Compensation Corporation (ACC), the Ministry of Social Development and Inland Revenue as employers when payments of ACC compensation and attendant care payments, paid parental leave and means-tested benefits are made. This outcome was not intended.
Payroll giving was intended to apply to employees who earn income in connection with their employment. People who receive payments of ACC compensation and attendant care payments, paid parental leave and means-tested benefits should not be permitted to make payroll donations from these payments. Officials note that there would be practical difficulties in making payroll giving available to people who receive such payments.
Recommendation
That the submission be accepted.
Issue: Employees having satisfied their tax and other statutory obligations
Submission
(32 – KPMG, 67 – New Zealand Institute of Chartered Accountants)
The bill should be amended to allow the employer to rely on the statement or assurance given by the employee that they have satisfied any tax obligation that they may have or any other statutory requirement that they may be obliged to meet from their salary and wages. This would help to minimise compliance costs for employers. Furthermore, any subsequent square-up should be between the employee and Inland Revenue.
Comment
Proposed section LD 7 provides that a person could only make payroll donations for a pay-period if they have satisfied all of their tax obligations (including, student loan and child support payments and KiwiSaver obligations) and any statutory requirements that they are obliged to meet from their wage and salary income. This requirement was intended to ensure that people paid their tax and social policy obligations from their employment income before making payroll donations. It was also intended that this requirement would apply on a pay-period basis.
As drafted, the bill does not impose any requirement on employers to verify that an employee is meeting all of their tax and other statutory obligations from their salary and wages before making any payroll donations. This aspect would help to reduce compliance costs on employers. We consider that in practice the employer would make the required pay-period tax and social policy deductions and any other deductions required to be made from an employee’s salary and, if there are sufficient funds, make the necessary adjustments for payroll donations.
Officials also consider that proposed section LD 7 should be amended so that it better reflects the stated policy intention.
Recommendation
That the submission be declined, but that proposed section LD 7 be amended so that it better reflects the stated policy intention.