Questions and answers
Small employers who do not use payroll software
What incentives will Government offer to get employers onto the new systems
Will Inland Revenue provide free payroll software
Costs to upgrade
Support for the proposals
Avoiding software problems
Penalties and interest
Q Is Government insisting that all employers use payroll software?
A No, the Government is not insisting that employers use software. Other options for calculating PAYE information will still be available and the smallest employers and those without access to internet services or computers will not be required to send the information to Inland Revenue electronically. The use of accounting software to file GST has contributed to a more than 20% reduction in compliance costs recorded in the latest survey of small businesses. In the light of these results employers might want to reconsider whether or not investing in software, or using Inland Revenue’s electronic services, is worthwhile.
Q Won’t payday filing increase compliance costs for small businesses that don’t use software?
A This is unlikely. The information required is the same. The difference is when it is provided to Inland Revenue. The changes are largely about making better use of modern digital systems and evidence from GST research suggests significant compliance cost gains for small businesses from investing in software. Employers who choose not to use software already work out the PAYE information for each payday. They need it to pay their staff. Logging onto to Inland Revenue’s website or completing a paper form each payday at the end of the payroll process could be easier than putting the information aside only to come back to it at the end of the month, add it up with the other paydays in the month and then send it to Inland Revenue.
Q Doesn’t filing automatically from software raise the risk that information will be accidentally transmitted before it is finalised or approved?
A This will be no more of a risk than it is today. Nothing is going to be sent to Inland Revenue automatically. Direct from software means information will be sent much more seamlessly from within the payroll system, but the operator will know they have logged onto Inland Revenue’s system and will know that they are sending the information.
Q If information is sent more quickly, won’t there be more errors and adjustments?
A Feedback from employers suggests the current processes are inefficient. With payday reporting it will be even more important to ensure that there are easy ways for employers to correct errors and make adjustments. An objective for those with payroll software is to automate the process.
Q Previously most employers only had one PAYE date to worry about each month, the 20th of the following month. Now with payday reporting and payment by the 20th don’t they have more to worry about?
A Employers have always had to worry about getting things done for payday. What these proposed changes mean is that sending information to Inland Revenue can become part of that payday routine. Employers will have the option of paying Inland Revenue then too, but the Government understands that many might prefer to hold onto the deductions until the payment dates required in the current legislation.
Q What support and incentives will Government be offering to encourage take up of the new systems?
A The best incentive is that it should be simpler for everyone concerned. There will be lots of communication and Inland Revenue will target support for customers who might have most difficulty.
Q Will Inland Revenue be providing free payroll software?
A No, payroll software does much more than provide information for tax purposes and it is not the Government’s intention to have Inland Revenue provide payroll software when existing providers make products and services available at a variety of price points. For employers with very simple payrolls, the PAYE calculators will still exist on Inland Revenue’s website and the website will be improved so that filing without using payroll software will be easier and more intuitive.
Q Will Government subsidise the cost to upgrade payroll software?
A No, the Government is not proposing to subsidise costs. Employers pay for upgraded software either through a subscription or contract fee or by paying for an upgraded version. The changes the Government is proposing will require software to be upgraded but these changes are often bundled together with upgrades the provider is making for other reasons. Employers who choose to file electronically through the Inland Revenue website will not face additional costs.
Q Will there be enough time for employers and software developers to be ready before the new system goes live?
A Enough time has been allowed for an orderly introduction. Inland Revenue will be ready to accept PAYE information on a payday basis from 1 April 2018 but under the proposals employers won’t be required by law to provide it until 1 April 2019.
Q Did the Government receive universal support for payday filing of PAYE information in response to the consultation document?
A The response was mixed. Many employers using payroll software were supportive or supportive with some caveats, such as automated error correction. On the other hand many small employers were uncomfortable with the prospect of being required to change their existing processes and were opposed to being required to invest in payroll software – which will not be required. However, as feedback from new the GST filing insights shows, moving to digital systems should reduce compliance costs.
Q There are recent examples of where Government-run software changes have caused problems. How can we be confident that this won’t happen again?
A This is entirely different as Government is not proposing to build payroll software and there are no significant changes to how PAYE and other deductions are calculated and paid. The changes are largely about how and when information is provided to Inland Revenue, and Inland Revenue will work closely with payroll providers to ensure success. Much of the information the Government wants to receive on a payday basis is already held by employers, but rather than being aggregated it is to be transmitted each payday.
Q Will payday filing increase employers’ exposure to late filing penalties?
A Some submitters expressed that concern, but this is not intended. By integrating the filing of information with paying employees it is less likely that employers will forget or overlook their filing obligation. The late filing penalty will remain a monthly penalty so the maximum late filing penalty an employer could be subject to remains $250 a month.