Levied on “earnings as an employee” which is defined as PAYE income payments, with certain exclusions.
Currently not included because not “PAYE income payments”.
If the PAYE system is adopted to tax employee share scheme benefits without any further amendment, ACC earners’ levy would have to be paid on these benefits. This is consistent with the treatment of employer-provided accommodation (a form of non-monetary remuneration subject to PAYE).
It would treat employee share scheme benefits in the same manner as cash wages, maintaining neutrality.
However, this treatment would depart from the current treatment and is potentially inconsistent with the policy of the ACC system. The payment of the ACC earners’ levy on a particular level of “earnings as an employee” entitles a claimant to weekly compensation in certain cases of accident or injury of 80 percent of weekly earnings as an employee. The question is, if there were an accident, should ACC be paying 80 percent in income replacement for this payment? An employee share scheme benefit is usually a one-off benefit that provides an on-going equity interest in an employer – therefore officials are of the view that they should not be included in “earnings as an employee” for ACC purposes. They are very different to a regular payment of cash (or on-going provision of accommodation) which contributes to the day-to-day living costs of an employee and which needs to be covered by the ACC system.
Therefore, officials are of the view that, if the PAYE system was adopted, there would be a need to exclude employee share scheme benefits from “earnings as an employee definition” to maintain current treatment.
If the FBT system is adopted, it will not be subject to ACC earners’ levy.
Working for Families tax credits
Wide definition of “family scheme income” in subpart MB.
Currently employee share scheme benefits are included, as is PAYE income and certain fringe benefits.
Regardless of treatment as a PAYE income payment or a fringe benefit, employee share scheme benefits should continue to be included in family scheme income to determine entitlement to Working for Families tax credits. It is a component of the earner’s total income and so is consistent with the Working for Families policy as targeted financial assistance to families that reduces with total income.
From 1 April 2014, the definition of “income” for student loan purposes has been broadly aligned with the definition for Working for Families purposes.
As for Working for Families employee share scheme benefits are currently included in income for student loan purposes.
Regardless of treatment as a PAYE income payment or a fringe benefit, employee share scheme benefits should continue to be included in income for this purpose.
Based on “taxable income”.
Employee share scheme benefits are currently included in taxable income for child support purposes.
Regardless of treatment as a PAYE income payment or a fringe benefit, employee share scheme benefits should continue to be included in taxable income for this purpose.
Based on “gross salary or wages.”
Employee share scheme benefits are currently excluded from gross salary and wages for KiwiSaver contribution purposes.
If employee share scheme benefits are treated as a PAYE income payment, the legislation would need to make it clear they are not “salary or wages” for KiwiSaver purposes.
If employee share scheme benefits are deemed to be fringe benefits, employee share scheme benefits will continue to be excluded from salary and wages for KiwiSaver purposes.
It would be difficult and impractical for the employer to withhold 3% of the value of the benefit and pay this into a KiwiSaver fund. It raises some of the practical issues of using the PAYE system for a non-cash benefit.
10 Sections 9 – 13 of the Accident Compensation Act 2001.
11 As a result of the Student Loan Scheme Amendment Act 2013.