The proposals are part of modernising New Zealand’s tax administration system and will use business/payroll systems to reduce compliance and administrative costs, for instance:
- Filing directly from payroll software will streamline the process of providing PAYE information. Research into SME compliance costs indicates that similar reforms in GST have already contributed to a reduction in compliance costs of more than 20%.
- It should be possible for a new employee to fill in a single online form when they join an organisation. The payroll system could then be used to send relevant parts of the information to Inland Revenue without that information having to be obtained and entered separately.
- It is acknowledged that there may be software costs and costs to change processes, but the goal is to reduce the extent to which Inland Revenue imposes separate or additional requirements on employers.
Obtaining PAYE information on a payday basis will enable Inland Revenue to identify problems more quickly, for example when an employee is using two M tax codes. This will improve the accuracy of deductions and reduce the likelihood that employees will miss out on entitlements or incur debt.
Payday PAYE information could also provide opportunities for government agencies to better match social assistance entitlements with periods of need, for example through shorter periods of assessment.