IR Electronic Filing Payroll Specification Document Final V1.4

Transcription

1 Inland Revenue IR Electronic Filing Payroll Specification Document Final V April 2018 to 31 March 2019 Prepared by: Date: 26 March 2018 Inland Revenue, National Office, Wellington In Confidence

2 Payroll Specification Document V1.4 Table of Contents Table of Contents Introduction Caveats Change C-Series ACC Earners Levy PAYE on Holiday Pay Student Loan Repayment Threshold ir-file replaced by myir Pay Day Filing Ability to amend employer returns ir-file Electronic filing Background Electronic Filing Network connectivity Data validation Operating systems Supported web browsers Error messages for ir-file New error messages Error types Error and warning messages Employer Electronic Filing Employer Monthly Schedule (IR 348) Tax on Schedular Payments Nil returns sent by electronic transfer Student Loans Required data for SLCIR and SLBOR SLCIR and SLBOR deductions with-no standard deductions EMS - Header Record EMS - DTL Record Electronic Deduction Form (IR345) SL repayments codes and the EDF EDF/IR345: header payment details Electronic Amendment Schedule (EAS) PAYE intermediaries Electronic Filing Electronic Payment Schedule (EPS) file specifications Header record Detail records DEP Earlier PAYE Period Detail Record DCP Current and Future PAYE period Electronic Amendment Schedule (EAS) File Specifications EAS Header record Detail records DTL Record Original Line Item DAL EMS amendments or new data Electronic Subsidy Claim Form (SCF) file specifications SCF Header record Detail records EMR Employer detail records EME - Employee detail records KiwiSaver Employers who must contribute to member savings Employers who need not contribute to member savings Definition of Salary and Wages for KiwiSaver purposes April 2018 to 31 March 2019 Final

3 5.3.1 Gross salary and wages KiwiSaver - Employees under CEC Validations Online Forms KiwiSaver Employment Details Form (KS1) KiwiSaver employment details (KED) form KiwiSaver KSH employer header record KiwiSaver KSD employment details record KiwiSaver Form Filing Transfer Confirmation KiwiSaver Form History KiwiSaver Form History List Calculation Details Table of Tax Codes as at 1 April M and M SL tax codes PAYE calculations ME/ME SL tax codes PAYE calculations M SL and ME SL Tax Code Student Loan calculations NSW Non-resident Seasonal Worker calculation SB, S, SH, ST and SB SL, S SL, SH SL, ST SL Tax Codes PAYE and SL calculations EDW and CAE and ND (No Notification) tax codes PAYE calculations ND (No Notification) tax code Flat rate deductions Special Tax Code/Special Deduction Rate flat rate deductions and flat rate above repayment threshold student loan calculations Schedular Payment Provisions Special Deduction Rate (SDR) and Special Tax Codes (STC) Repayment deduction exemption Employee Share Schemes (ESS) Extra pay (Lump Sum) - Primary income Extra pay (Lump Sum) - Secondary Income Lump sum payment taxed at the lowest rate Regular bonuses Schedular Payments Rates of tax for schedular payments Tax deducted from Schedular payments Child Support Employer Deduction Notice CS Protected net earnings Calculating Protected net earnings on other Attachment Orders Payroll Giving Inland Revenue arrears payments Initiating electronic payments using payroll software packages Electronic payment format requirements Particulars field Reference field Fringe Benefit Tax Opportunities for Payroll Developers Short-form alternate rate calculation Full alternate rate calculation Full alternate rate calculation process Annual filers ESCT (employer s superannuation contribution tax) Options for calculating tax on employer contributions Calculation Details Amount of employer superannuation cash contributions to be shown on the EMS April 2018 to 31 March 2019 Final

4 ESCT rate threshold amount Definition of ESCT threshold Employer contribution and ESCT calculated using whole dollars and cents ESCT calculation examples Employee with employer for whole tax year Employee with employer less than 12 months Calculating ESCT using the ESCT threshold tax amount ESCT calculation where an employee contributes to both a KiwiSaver Superannuation scheme and a Complying Fund Refund of ESCT when an employee opts out Appendix Inland Revenue (IRD) Number validation Check digit validation myir format and layout File format Location File naming suggestions Compression End of record indicator Trailer record Data Attributes Bank account number validation Change Log April 2018 to 31 March 2019 Final

5 1. Introduction Inland Revenue offers online and myir 1 services that gives employers, tax agents and payroll bureaus secure and convenient methods of filing employer monthly schedules online. This document provides the detailed specifications for the myir technical interface. Additionally, this document provides employers with information regarding employment details for KiwiSaver, and ESCT (employer s superannuation contribution tax), and a how to for initiating electronic payments from employers to Inland Revenue. This version of the Payroll Specification Document updates and replaces all previous versions. This updated version is reformatted to take into account feedback pertaining to the document layout and readability from payroll software developers and internal Inland Revenue staff. No changes to data interfaces or processing are needed as a result of this version release. No technical tax information is changed in this reformat. 1.1 Caveats Whilst every reasonable attempt has been made to ensure legislation has been correctly interpreted, this document is intended as a myir technical interface specification only. We have included examples to assist you but these are not intended to be exhaustive and cover every possible factual situation that may occur. If you have an enquiry in relation to tax technical matters, please contact us either by: sending us a secure through myir writing us a letter calling our employers line on ( for overseas) between 8:00am and 8:00pm Monday to Friday or 9:00 to 1:00pm Saturday. If you need to contact Large Enterprises Services (LES), please phone between 8.00am 4.30pm Monday to Friday only, or for overseas. or mobile phones. An electronic version of the final version of this specification can be found at the following link: 1 See section 1.7 for more information regarding this change April 2018 to 31 March 2019 Final

6 Any updates to the final version of this specification will be posted at the following link: Change As noted above, from time to time Inland Revenue may enhance the services provided by the Inland Revenue myir interface or make changes to the Inland Revenue Systems for a variety of reasons including changes to legislation. Where modifications are made to the Inland Revenue myir Environment or to the Inland Revenue's Systems, they will only be made after payroll software developers have been given the opportunity to provide comment and feedback. This feedback will be used to assess impact and payroll software developers implementation schedule, and to help inform Inland Revenue s decision on what is an appropriate notice period for implementation of changes. A change log will be kept of all changes to this document (see appendix 7.5) 1.3 C-Series PLEASE NOTE: As part of Inland Revenue s business transformation programme, Inland Revenue is encouraging its customers to embrace its digital service offerings. From 1 April 2018, Inland Revenue will no longer support C-Series Employer Monthly Schedule (EMS) returns April 2018 to 31 March 2019 Final

7 1.4 ACC Earners Levy Cabinet considered the 2018/19 ACC levy rates and agreed: To set the Earners Account Average levy rate per $100 of liable earnings to (incl. GST) $1.39 To increase the maximum liable earnings that self-employed and businesses pay Work Account levies on as outlined below: 2017/18 (from) 2018/19 (to) Employees and private domestic workers (Work and Earners Accounts) Self-employed people (Work and Earner s Accounts) $124,053 $126,286 $122,063 $124,053 To set the minimum liable earnings that self-employed people pay Work and Earners' levies on be increased to $32,760 in 18/19 in line with changes to the minimum wage. 1.5 PAYE on Holiday Pay From the 1 st of April 2016, the tax treatment of holiday pay has been clarified. Holiday pay is classified and taxed as either salary or wages or extra pay both terms are specifically defined for income tax purposes. In addition to this clarification, from the 1st of April 2018 employers can choose to calculate tax on a lump sum payment of holiday pay (or salary/wages) paid in advance as either an extra pay or as if this lump sum was paid as a regular salary or wages payment over the pay periods to which it relates (the alternative approach). Calculate PAYE using the alternative approach by: apportioning the lump sum payment across the pay periods that the payment relates to, calculating PAYE on each of these apportioned amounts as if they were the only payments made to the employee in each pay period, adding these PAYE amounts together and deducting this amount from the lump sum payment. Another PAYE calculation is needed when the whole pay period is not taken as annual leave and the annual leave was taxed using the alternative approach April 2018 to 31 March 2019 Final

8 Calculate PAYE in this instance for the part of the pay period not taken as annual leave by: adding together the amount of the holiday pay and the regular salary/wages for the pay period, calculating the amount of PAYE that is required to be withheld from the combined amount as if it were a single payment, this is the total PAYE payable for the pay period, subtracting the PAYE that was deducted from the amount of the holiday pay apportioned to that pay period from the amount of PAYE calculated in the previous step. The amount left is the amount of PAYE to be deducted from the payment of salary/wages. Note: If an employee is a member of KiwiSaver or has a student loan, these deductions and repayments will be calculated on the lump sum as a whole, even if PAYE is calculated using the alternative approach. Refer: Employer s guide IR335 for further information on this method. See the Commissioner s operational position on calculating PAYE on holiday pay for more information on how to categorise holiday pay. See section 6.10 for details of extra pay (lump sum) calculations. 1.6 Student Loan Repayment Threshold Effective from 1 st of April 2018 the student loan repayment threshold has increased to $19,448 for the 2018/19 tax year. Frequency tax year tax year Annual threshold $19,136 $19,448 Weekly pay period (Threshold divided by 52) Fortnightly pay period (Threshold divided by 26) Four-weekly pay period (Threshold divided by 13) Monthly pay period (Threshold divided by 12) $368 $374 $736 $748 $1,472 $1,496 $1, $1, Note: Order in Council confirmed 18/12/ April 2018 to 31 March 2019 Final

9 1.7 ir-file replaced by myir From April 2018, ir-file will no longer be used for Electronic Filing of the employer monthly schedules (EMS). The myir system will be used instead, as detailed below in section 2. Note: Development work is currently underway on the myir Kiwisaver file transfer screens, and information on this will be included in a subsequent version of this document. While we had intended to make EMS filing available as one of our new My business services, the filing process for Employer Monthly Schedules (EMS) will not change from 17 April. Customers will continue to file their EMS as they have in the past, e.g. through ir-file in myir. 1.8 Pay Day Filing The Taxation (Annual Rates Employment and Investment income and Remedial Matters) Bill (April 2017 Bill) requires employers to file employee income and deduction information on a payday basis to IR. It is proposed that as of 1 st April 2018, employers can choose to opt in to file their employer obligations data to IR on a payday basis, rather than on the currently monthly basis. This is voluntary pay day filing. Note: Payday filing must start from the beginning of the month, and each payday in the month must be payday reported. Payday filing will become compulsory from 1 st April The employee income and deduction information for payday filing is to be provided to IR on an Employment Information (EI) return. Amendments to the EI will also be done by pay day. Please refer to the IR Electronic Pay Day Filing Payroll Specification. 1.9 Ability to amend employer returns From April 2018, employers will also be able to electronically amend the returns that they file. Instead of filing a paper IR344, myir can be used to amend their employer returns. PAYE intermediaries will still be able to file electronic amendments through the EAS process April 2018 to 31 March 2019 Final

10 2. ir-file Electronic filing 2.1 Background Legislation requires employers with PAYE and ESCT deductions totalling more than $100,000 per annum to file their returns electronically, (both the EDF and EMS), by a data transfer mechanism. Other employers can choose to do so voluntarily. 2.2 Electronic Filing The myir ir-file system enables employers, tax agents, payroll bureaus, payroll intermediaries and others to send electronic versions of the employer monthly schedules IR348 (EMS Employer Monthly Schedule) and remittance advice forms IR345 (EDF Electronic Deduction Form) securely to IRD via the internet. The information is sent across the internet to our server and then transferred into our FIRST tax system. Employers can also send KiwiSaver enrolment and opt out forms (KED) Network connectivity Employers, agents and bureaus can connect to the internet through an ISP as illustrated in the following: Internet ISP Employers, agents and bureaus ir_file ir-file FIRST It should be noted that employer returns filed through myir will be able to be viewed and amended as required after the initial filing, however deductions and contributions will not update fully into employer and employee accounts until after the standard return due date (e.g. 5 th of the month, 20 th of the month) Data validation Transferred files are validated in the ir-file system servers and the customer informed of any errors. This validation is designed to provide instant turnaround, ensuring customers are provided with an immediate response of their errors or filing status April 2018 to 31 March 2019 Final

11 Customers will be able to observe online the progress of their file transfer and any validation process undertaken by the system Operating systems The myir system is operating system independent. However, a supported browser is required; please see section below Supported web browsers At the date of publication of this document, the following web browsers are supported for use with myir: Apple Safari Google Chrome Microsoft Edge Microsoft Internet Explorer 9 or newer Mozilla Firefox If an unsupported browser is detected accessing the site, the following message will display: Error messages for ir-file The Error messages will be displayed using the current ir-file format. Below is an example, showing the employer IRD number, the period being filed and the error message April 2018 to 31 March 2019 Final

12 2.2.6 New error messages New error messages relating to ir-file will be noted throughout this document, in the section the new error message relates to. The new message will be highlighted as a change to the previous version of the payroll specification document Error types There are a number of error types that can be received when transferring files to us. All are four characters long, comprising an alpha character and three numeric characters e.g. D036 There is an incorrect number of fields in the detail line. The schedule must be corrected before it can be sent April 2018 to 31 March 2019 Final

13 The following information provides the location of the error messages relating to filing using ir-file: Using IRs Secure Online Services: 1. Login to your ir-filing account 2. On the Home page 3. From the menu on the left hand side 4. Select FAQ Example of menu FAQ will launch another menu Select 3 rd option Error messages April 2018 to 31 March 2019 Final

14 This will launch error messages screen and allow you to seach on the Alpha letter at start of the error message. Alpha D E F H I J L M P Subject Detail line - DTL Unable to retrieve account information File transfer errors Header line - HDR System errors Conditions that prevent file from transferring Technical difficulties Relate to Account information data Test-a-file notification success or errors NB: While every attempt is made to provide accurate information when an error is encountered, where there are multiple errors the error messages may not display in sequential order. Transferred files are validated by myir and the customer informed of any errors. This validation is designed to provide instant turnaround, ensuring customers are provided with an immediate response of any errors. Error messages will be displayed using the current myir format. There are also warning messages that may display. See section for details Error and warning messages There are a number of error messages that can be received when transferring files to us. The messages will display clear details of the error or issue that has been found. There are two levels of messages in myir: 1. Error messages that will stop the file upload e.g. totals do not match the individual return lines 2. Warning messages that will not stop the file upload e.g. invalid employee IRD number Below is an example of both an error message and a warning message. The warning message is indicated by the tick box in the warning column and there is text in red that highlights whether the file can be accepted: April 2018 to 31 March 2019 Final

15 15 01 April 2018 to 31 March 2019 Final

16 3. Employer Electronic Filing Employers can file IR 348 (Employer Monthly Schedule or EMS) and IR 345 (Employer Deduction Form or EDF) via myir file upload. The sections below detail the record structures for doing this. Employers may also file KiwiSaver information using myir. Refer to section 5 for details on filing KiwiSaver information. Refer to section 7.3 for generic myir layout and format information. Employers, or employers within the same group or group of entities, are required to pay employer deductions twice monthly if their annual PAYE and ESCT deductions are $500,000 or greater. Employers whose annual PAYE and ESCT deductions are $100,000 or greater are also required to file electronically. Employers whose annual PAYE and ESCT deductions are less than $500,000 are required to file their EMS and pay their employer deductions on or before the 20 th of the month following the month of deduction; employers who file electronically can voluntarily pay twice monthly if they wish. 3.1 Employer Monthly Schedule (IR 348) The IR 348 is the Employer Monthly Schedule (EMS), and must incorporate all payments made to employees (and/or contractors) from the first day of the month to the last day of the month. As the name suggests, this schedule is filed monthly. The due dates for the EMS vary depending on the employer. For large employers, this is the 5th of the month following the month the PAYE was deducted or the 15th of January, if December is the month the PAYE was deducted. For small employers, the due date is the 20th of the month following the month the PAYE was deducted. If the due date falls on a weekend or public holiday (including a provincial anniversary day), then the due date becomes the next working day April 2018 to 31 March 2019 Final

17 3.1.1 Tax on Schedular Payments The gross amount of schedular payment and tax deducted must be identified separately from normal gross pay and PAYE deducted. If you have an employee who received both salary or wages and schedular payments you will need to be able to identify the amount of schedular payment and the normal salary and PAYE when you create the employer monthly schedule. For example, if an employee gets a normal salary under the M tax code as well as schedular payments, you will need to have two lines for the employee on the employer monthly schedule. One line would contain the salary and PAYE with the tax code showing as M and the second line would have the gross schedular payment, Earnings not liable for ACC Earners Levy (which should be equal to gross schedular payment), and tax with a tax code of WT. For more information on Schedular Payments, refer to section Nil returns sent by electronic transfer For a nil schedule to be accepted by myir it must have, in addition to the header record, a detail line with a IRD number, the words nil schedule in the employee name field and nil or blank values as appropriate in the other fields. Any other information in these fields is unacceptable April 2018 to 31 March 2019 Final

18 3.2 Student Loans The student loan repayment rate (standard deduction rate) for all New Zealandbased borrowers is 12%. For a student loan borrower, the following student loan deductions are made: For main employment income, a deduction of the standard deduction rate from the gross income over the pay period repayment threshold ($374 per week) should be made. For secondary employment income, a deduction of the standard deduction rate from the gross income should be made. Other areas to note for student loans: Unused Repayment Threshold Special Deduction Rate (URT SDR): If a borrower has more than one employer at the same time, and gross income from main employment is below the pay period repayment threshold, the borrower can apply to IR for an URT SDR to have the unused portion of the pay period threshold allocated to secondary employers. For an URT SDR, the borrower is still required to use a SL repayment code (unless they also have a special tax code, in which case STC is the code to be used). Depending on the amount of unused repayment threshold, the Student Loan deduction rate advised on the certificate could be anything from 0% to 11%. Repayment Deduction Exemption (RDE): Borrowers who are studying fulltime and expect their income for the year to be under the annual repayment threshold are eligible to apply for an RDE. For the period of time an RDE is in effect, the borrower is exempt from having Student Loan deductions made from their salary and wages and does not have to use an SL repayment code. Therefore the Student Loan deductions are 0% April 2018 to 31 March 2019 Final

19 Commissioner deductions (SLCIR): The repayment code to be used for Commissioner deductions is SLCIR. Commissioner deductions are extra deductions and may be required if the Student Loan standard deductions were less than the amount that should have been deducted. IR will notify the borrower and employer if Commissioner deductions are required to be made. Notification will specify the amount to be recovered, and the percentage to be deducted until that amount has been reached. The maximum rate will be 5% on gross income (over the pay period repayment threshold) for primary employment earnings. For secondary income this will be 5% on the gross payment of salary or wages. However, the compulsory extra deduction notices refer to a deduction rate based on student loan standard deductions as per the example below. Example: How to calculate the compulsory extra deductions Employer receives a student loan compulsory extra deduction notice for their employee asking them to make the extra deductions at 41.67% of the employees student loan standard deduction. The employee is paid weekly so their deductions for November will be as follows: Week Student loan standard deduction Student loan compulsory extra deduction Calculation 1 $45.90 $ % of $45.90 = $ $60.00 $ % of $60.00 = $ $0.00 $0.00 No standard deduction so no compulsory extra deduction required 4 $56.80 $ % of $56.80 = $23.66 Total $ $ April 2018 to 31 March 2019 Final

20 Voluntary deductions (SLBOR): The repayment code to be used for voluntary extra deductions is SLBOR. Borrower deductions are extra deductions that can be requested by employees wishing to pay more towards their Student loan. The amount, or percentage, to be deducted is determined by the borrower Required data for SLCIR and SLBOR The file structure for the repayment codes SLCIR and SLBOR will follow the existing Detail (DTL) line structure. For each employee who has SLCIR or SLBOR the DTL line will have values in five fields - Detail Record Indicator Employee IRD Number Employee Name Employee Repayment code (e.g. SLCIR and SLBOR) Student Loan Deductions The remaining 15 fields will be blank/empty as is the current practice where a DTL field does not require/contain a value. Where an employee has both additional SLCIR and SLBOR student loan deductions, a separate detail line will be created for each deduction Having these as separate lines will ensure the SL deduction repayment is applied correctly to the borrower s loan balance SLCIR and SLBOR deductions with-no standard deductions If a borrower has no standard student loan deduction for the pay period because gross income is below the pay period threshold (when using a main tax code with SL ) or a special deduction rate of 0% applies for the pay period then: A SLBOR deduction is still able to be made. The thresholds and zero special deduction rates will not affect the calculation of SLBOR deductions. A SLCIR deduction is not required to be made April 2018 to 31 March 2019 Final

21 3.3 EMS - Header Record There will be no change to the file structure of the electronic EMS HDR with the introduction of the new SL tax codes. The form version number remains as The Total Student Loans field will be an aggregate total of all SL deductions for all employees. In general the relationship of SL deductions for an employee is 1 employee = 1 SL repayment deduction. There can be scenarios where a main source of income M SL becomes a secondary source of income S SL. This can generate two EMS lines with SL deductions i.e. 1 employee = 2 SL repayments. From 1 April 2012 this will change to a potential relationship of 1 employee = 3 SL repayment deductions. All SL deductions will be included in the Total Student Loan deductions field. The header record precedes the detail records. It will contain data about the employer including summary totals in the following format and layout: Item description Attribute Field size Default values/notes Header record indicator Employer IRD number ALPHA 3 This must have a value of HDR to indicate the employer header record. IRD 9 A valid IRD number. Validation rules are outlined in Appendix 7.1. Return period DATE 8 The last day of the month for which the schedule is being filed. Name of payroll contact person Payroll contact work phone number Format CCYYMMDD e.g ANAM 20 The name of the payroll contact person for IRD purposes. This is a compulsory field and the preference is first name surname with a space between names included in the 20 character total. Must not include embedded commas. ANUM 12 The daytime work contact phone number for the payroll contact person. 12 alphanumeric characters and must not include commas Total PAYE / tax PDEC 14 The sum of the PAYE and tax on schedular payments deducted for all employees for the month being filed. Must be converted to a positive figure if amounts deducted are treated as a negative. Cannot be greater than total gross earnings. Calculated using the tax calculations detailed later in this document April 2018 to 31 March 2019 Final

22 Item description Attribute Field size Default values/notes Total child support PDEC 14 The sum of the child support deductions for all employees for the month being filed. Calculated from CS 503. Must be converted to a positive figure if amounts deducted are treated as a negative. Total student loans PDEC 14 The sum of all SL repayment deductions for all employees for the month being filed. Total KiwiSaver deductions Total net KiwiSaver employer contributions Total Tax credits for payroll donations Total family tax credits Must be converted to a positive figure if amounts deducted are treated as a negative. PDEC 14 The total amount of KiwiSaver contributions deducted from all the employees for the period. PDEC 14 The total net (excluding ESCT) amount of KiwiSaver employer contributions on behalf of all employees for the period. PDEC 14 The total of all employees tax credits for payroll donations PDEC 14 The sum of the family tax credit payments for all employees for the month being filed. This will be 0, except when the data is from Work and Income. Total gross earnings PDEC 14 The sum of the gross earnings for all employees for the month being filed as calculated from Employer pay records. Total earnings not liable for ACC Earners Levy Payroll package and version no. identifier of payroll contact person IR form version number PDEC 14 The sum of the earnings not liable for ACC Earners Levy for all employees for the month being filed as calculated from Employer pay records. (This does not include earnings over the maximum liable earnings threshold set for the year) If tax for schedular payments is being deducted then earnings not liable for ACC Earners Levy should be equal to Gross schedular payment. Earnings not liable for ACC Earners Levy should not be greater than gross earnings and is a whole dollar figure. ANAM 80 This field will contain the payroll package and version no. identifier. e.g. Vendor_Package_v1.0. This value will be unique for each Payroll software developer/package/version combination. It will not contain any Employer information. Note: If it doesn t meet one of the other field formats it can error if length of field is greater than 20. Eg. contact phone number is greater than This field will contain the address of the payroll contact person. NUM Acceptable characters are A-Z, a-z, _. Syntax must string, and not contain double periods, e.g. myname@mycompany.co.nz April 2018 to 31 March 2019 Final

23 3.3.1 EMS - DTL Record Where an employee has SLCIR and/or SLBOR, an additional DTL, for each additional repayment deduction, will be required on the EMS. These additional DTL records must follow the Employment Income DTL record for the employee. For the employee details required for SL repayment codes SLCIR and SLBOR in the additional DTL lines on the EMS, refer to section As there is no increase in the number of fields in the HDR there is no change to the HDR version number of Item description Attribute Field size Default values/notes Detail record indicator Employee IRD number ALPHA 3 This must have a value of DTL to indicate employee details record. IRD 9 IRD number of employee, as per Employer pay records. Validation rules are outlined in Appendix 7.1. If invalid then enter and ensure Employee tax code equals ND (no notification) until a valid tax code is supplied by the employee. PAYE should also be made at the ND rate. Employee name ANAM 20 Preference is surname first name with a space between names included in the 20 character total. Must not include embedded commas. Employee tax code RANGE 5 See section 6.1 for a list of accepted tax codes. Start date DATE 8 Only enter if employee started during the month, otherwise leave blank. Enter once only Do not keep entering start date on subsequent returns filed. Must be in format CCYYMMDD. Finish date DATE 8 Only enter if employee finished during the month, otherwise leave blank. Must be in format CCYYMMDD. Gross earnings and/or schedular payments PDEC 14 The taxable gross earnings for the employee for the period. Non-taxable allowances not included. Calculated by totalling gross pays for each employee for the period from the first of the month to the end of the month. Truncate total to whole dollars, e.g. $3, becomes $3, April 2018 to 31 March 2019 Final

24 Item description Attribute Field size Default values/notes Earnings and / or schedular payments not liable for ACC Earners Levy PDEC 14 The employee s earnings for the period, which are not liable for ACC Earners Levy. (This does not include earnings over the maximum liable earnings threshold set for the year). This cannot be greater than gross earnings. Calculated by totalling gross pays for each employee for the period from the first of the month to the end of the month. Truncate total to whole dollars, e.g. $ becomes $ Earnings not liable should be equal to gross if schedular payment has been made. Lump sum (extra pay) indicator PDEC 1 This indicates whether the employee has received a lump sum payment that has been taxed at the lowest rate during the monthly period. 1 for yes otherwise must be 0. See section 6.10 for extra pay PAYE calculation details and extra pay student loans calculations. PAYE / tax PDEC 14 PAYE or tax on schedular payments deducted from employee s earnings for period. Does not include student loan or child support deductions. Cannot be greater than gross earnings. Child support deductions PDEC 14 The amount of child support deducted from the employee s earnings for the period. Calculated by totalling the child support deductions on the employee s pays for the period. 0, except when the employee is a liable parent. Cannot be greater than gross earnings. Child support code PDEC Must be blank or one of : Priority C=ceased employment 1 A=advanced payment 2 P=protected earnings 3 S=short term absence 4 D=deducted previously 5 O=other 6 If more than one variation code is used the priority of the variation codes should be as above i.e. (1-6), the lowest number is the highest priority. If no variation codes or child support not deducted for employee then leave blank April 2018 to 31 March 2019 Final

25 Item description Attribute Field size Default values/notes Student loan deductions PDEC 14 The amount of student loan repayments deducted from the employee s earnings for the period. 0, except when the employee has a student loan tax code (see section 6). Cannot be greater than gross earnings. For deductions SLBOR, SLCIR, see Example EMS below. KiwiSaver deductions PDEC 14 The amount of KiwiSaver contributions deducted from the employee s gross earnings for the period. NOTE: Must be one of 0, 3%, 4% or 8% of the employee s taxable gross earnings for the period. Net KiwiSaver employer contributions PDEC 14 The amount of net KiwiSaver employer contributions paid on behalf of the employee for the period. NOTE: this amount will be exclusive of any ESCT payable on the contribution. Tax credits for payroll donations PDEC 14 The amount of tax credits for payroll donations granted to the employee for the donation(s) made. Family tax credits PDEC 14 The amount of family tax credits paid to the employee for the period. This must be 0 except when the employer is Work and Income April 2018 to 31 March 2019 Final

26 Example EMS The following is an example of the notepad EMS file. NB: the example is intended to show the layout of the file calculated figures may not be accurate HDR, , ,Bill Smith, , ,000,47024,19785,16671,0,0,806650,147150,APEXGroup_3.32-1,,0004 DTL, ,Brown John,S,,,60100,0,0,11747,0,,0,1803,1803,0,0 DTL, ,Clark Craig,SB SL,,,151900,0,0,29699,0,,18228,4557,3770,0,0 DTL, ,Clark Craig,SLBOR,,,0,0,0,0,0,,10000,0,0,0,0 DTL, ,Cook Cameron,M SL,,,211500,0,0,33793,0,,6296,6345,5243,0,0 DTL, ,Cook Cameron,SLBOR,,,0,0,0,0,0,,5000,0,0,0,0 DTL, ,Cook Cameron,SLCIR,,,0,0,0,0,0,,7500,0,0,0,0 DTL, ,Cork Chelsea,M,,,236000,0,0,38588,0,,0,7080,5855,0,0 DTL, ,French Carol,WT,,,147150,147150,0,29430,000,,0,0,0,0,0 The Student loan amounts and Kiwisaver deductions are highlighted. The total student loan deduction on the HDR line is the sum of the combined SL repayment deductions i.e. SB SL, M SL, SLBOR and SLCIR. Note: Employee John Brown has ESCT paid on top of the contribution (this is the excluded option) April 2018 to 31 March 2019 Final

27 3.4 Electronic Deduction Form (IR345) This form is used to record and pay the deductions made from employees pay. This form should correspond to a payment made to Inland Revenue (either directly or electronically) Filing an IR345 online by submitting an EDF or Electronic Deduction Form has been available to ir-file (and going forward, myir) users since July The information in this section details how this can be achieved. For payroll giving, the PAYE and/or tax on Schedular payments field will be a PAYE payable field. This means, that the figure in this field will be PAYE minus tax credits for payroll donations. There will be help text inserted on the above page to explain this. If the employer is a monthly filer and the EMS is completed in the same online session, the totals will still pre-populate, however, the PAYE and/or tax on schedular payments field will automatically deduct the tax credits for payroll donations, and pre-populate the field with the PAYE minus tax credits for payroll donations figure. The EDF will be available in the Users Workspace for six (6) months after filing. The EDF then follows current EMS automatic trash rules. All EDF forms with effective periods prior to 1 April 2008 and following 1 April 2009 will not show ETC fields when viewed in online account history SL repayments codes and the EDF There are no file structure or field attribute changes to the EDF and therefore no change to the version number of The sum of all student loan deductions will be the amount in the Total Student Loan Deduction field. The Total Student Loans value on the EMS HDR record for the Return Period End will equal the Total Student Loan Deductions on the EDF April 2018 to 31 March 2019 Final

28 3.4.2 EDF/IR345: header payment details Item description Attribute Field size Default values/notes Detail Record Indicator ALPHA 3 EDF Employer IRD number IRD 9 A valid IRD number. Validation rules are outlined in Appendix 7.1. Payment Date DATE 8 The 15 th or end of the period for which the schedule is being filed for DCP Total PAYE and Tax on schedular payments Total Child Support Deductions Total Student Loan Deductions PDEC 13 Total PAYE deducted for all clients NB: For payroll giving, this field will be PAYE minus tax credits for payroll donations Able to accept with no value. PDEC 13 Total child support deductions of all clients Able to accept with no value. PDEC 13 Total of all student loan repayment deductions of all clients Able to accept with no value Total KiwiSaver Deductions PDEC 13 The total amount of KiwiSaver deductions from the employee s earnings for the period. Able to accept with no value. Total net KiwiSaver Employer Contributions PDEC 13 The net amount of employer contributions being paid on behalf of the employee for the period. Able to accept with no value. Total ESCT Deducted PDEC 13 Total ESCT deducted of all clients Able to accept with no value Total Amounts Payable PDEC 13 The total of all amounts to be deducted: Total PAYE & tax on schedular payments deducted. NB: For payroll giving, this amount will be PAYE minus tax credits for payroll donations Total Child Support deductions Total Student Loan deductions Total KiwiSaver deductions Total KiwiSaver Employer Contributions Total ESCT deducted Must not be blank. Nil values should be represented by zero, i.e. 0. (D139 - The total amounts payable field in the EDF is incorrect. The total amount payable must equal the total of all amounts deducted. This error must be corrected before the schedule can be sent) April 2018 to 31 March 2019 Final

29 Item description Attribute Field size Default values/notes IR Form Version Number NUM Example EDF EDF, , ,143257,0,47024,19785,16670,3114,229850,0003 The Total Student Loan Deductions is the sum of the combined SL repayment deductions from the EMS HDR for the Period End date. 3.5 Electronic Amendment Schedule (EAS) Refer section 4.2 for details of the EAS. From April 2018, employers can now file an electronic amendment schedule to amend their EMS (IR348 return) instead of fiing a paper IR April 2018 to 31 March 2019 Final

30 4. PAYE intermediaries Electronic Filing The PAYE intermediaries scheme that began in 2004 has been extended to enable accredited PAYE intermediaries to apply to become listed PAYE intermediaries. A listed PAYE intermediary who contracts with small employers to manage their payroll obligations may apply to receive a subsidy from Inland Revenue for these services. A small employer is one whose total PAYE, tax on schedular payments and ESCT amounts are less than $500,000 in the previous tax year. If the employer was not in business in the previous tax year, their total PAYE, tax on schedular payments and ESCT amounts deducted need to be less than $500,000. This initiative is intended to reduce compliance costs for small employers by promoting the use of listed PAYE intermediaries. The subsidy will be paid monthly at a flat rate, calculated at $2 per employee per pay date for up to five employees per month for each small employer. The subsidy is GST-inclusive and subject to income tax. The scheme became effective from 1 October The primary interface between Inland Revenue and PAYE intermediaries will be the myir platform. As a consequence, the myir platform incorporates the following changes for Payroll Intermediaries: The Electronic Payment Schedule (EPS) provides a PAYE intermediary with the ability to submit an electronic payment schedule detailing all their respective clients payment information. This information will also be used to allocate the electronic payment which will be made by the intermediary The Electronic Amendment Schedule (EAS) provides the PAYE intermediary with the ability to submit multiple amended employer monthly schedules electronically for their respective clients. The Electronic Subsidy Claim Form (SCF) will let listed PAYE intermediaries submit an electronic subsidy claim form by myir April 2018 to 31 March 2019 Final

31 4.1 Electronic Payment Schedule (EPS) file specifications This section specifies the file format and layout for the EPS that will be sent through the myir system. The file layout should conform to the layout specified in Appendix 7.3. A PAYE intermediary can send only one EPS per day per period. An intermediary can send an EPS without an employer monthly schedule (there is no dependency). An EPS (Electronic Payment Schedule) must have a header line. A PAR (Employee Deductions Detail Record) is no longer to be used for the payment of authorised employee arrears amounts to be deducted. A DEP record cannot follow a DCP record April 2018 to 31 March 2019 Final

32 4.1.1 Header record The header record precedes the detail records. It will contain data about the PAYE intermediary including summary totals in the following format and layout: Item Description Attribute Field Size Default Values/Notes Header record indicator PAYE intermediary IRD number Period end date Total PAYE and tax on schedular payments Total child support deductions Total student loan deductions Total KiwiSaver Deductions Total net KiwiSaver Employer Contributions Total ESCT deducted Grand total of amounts to be deducted ALPHA 3 This must have a value of EPS to indicate header record. IRD 9 A valid IRD number. This is a 9-digit number. It cannot be DATE 8 This must be populated with a valid Period end date NUM 14 The total of the PAYE and tax on schedular payments for all clients must not be blank. Nil values should be represented by zero, i.e. 0. NB: For payroll giving, this field will be PAYE minus tax credits for payroll donations NUM 14 The total of the child support deductions of all clients must not be blank. Nil values should be represented by zero, i.e. 0. NUM 14 The total of all student loan repayment deductions of all clients must not be blank. Nil values should be represented by zero, i.e. 0. NUM 14 The amount of KiwiSaver contributions deducted from the employee s earnings for the period. Nil values should be represented by zero, i.e. 0. NUM 14 The net amount of employer contributions being paid on behalf of the employee for the period. Nil values should be represented by zero, i.e. 0. NUM 14 The total of the ESCT deducted for all clients must not be blank. Nil values should be represented by zero, i.e. 0. PDEC 14 The total of all amounts to be deducted: total PAYE and tax on schedular payments deducted. NB: For payroll giving, this amount will be PAYE minus tax credits for payroll donations total child support deductions total student loan deductions total KiwiSaver deductions total KiwiSaver employer contributions total ESCT deducted Must not be blank. Nil values should be represented by zero, i.e. 0. (D138: The grand total of the amounts deducted field in the EPS header line is incorrect April 2018 to 31 March 2019 Final

33 Item Description Attribute Field Size Default Values/Notes IR form version number NUM Detail records The detail records are shown as DEP and DCP. The DEP and DCP record contains client (employer) details. DEP details represent earlier PAYE periods and DCP details represent current and future PAYE periods DEP Earlier PAYE Period Detail Record Item description Attribute Field size Default values/notes Detail record indicator ALPHA 3 This must have a value of DEP to indicate detail record. Employer IRD number IRD 9 A valid IRD number. This is a 9-digit number. It cannot be Period ended DATE 8 The 15 th or end of the period for which the schedule is being filed. The period relates to an earlier PAYE period. Valid format is CCYYMMDD. PAYE and Tax on schedular payments Child Support Deductions Student loan deductions KiwiSaver Deductions KiwiSaver net Employer Contributions ESCT (Employer s Superannuation Contribution tax) PDEC 14 The sum of the PAYE and tax on schedular payments for all the employees for the period filed must not be blank. Nil values should be represented by zero, i.e. 0. NB: For payroll giving, this field will be PAYE minus tax credits for payroll donations PDEC 14 The sum of the child support deductions for all employees for the period being filed must not be blank. Nil values should be represented by zero, i.e. 0. PDEC 14 The sum of all the student loan repayment deductions for all employees for the period being filed must not be blank. Nil values should be represented by zero, i.e. 0. PDEC 14 The amount of KiwiSaver contributions deducted from the employees earnings for the period. Nil values should be represented by zero, i.e. 0. PDEC 14 The net amount of employer contributions being paid on behalf of the employees for the period. Nil values should be represented by zero, i.e. 0. PDEC 14 The sum of the ESCT deducted for all employees for the period being filed must not be blank. Nil values should be represented by zero, i.e April 2018 to 31 March 2019 Final

34 Item description Attribute Field size Default values/notes Total amounts deducted PDEC 14 The total of all amounts deducted: PAYE and tax on schedular payments deductions. NB: for payroll giving, this amount will be PAYE minus tax credits for payroll donations Child Support deductions Student loan deductions KiwiSaver deductions KiwiSaver net Employer contributions ESCT deducted Must not be blank. Nil values should be represented by zero, i.e April 2018 to 31 March 2019 Final

35 4.1.4 DCP Current and Future PAYE period Item description Attribute Field size Default values/notes Detail record indicator ALPHA 3 This must have a value of DCP to indicate detail record. Employer IRD number IRD 9 A valid IRD number. This is a 9-digit number. It cannot be Period Ended DATE 8 The 15 th or end of the period for which the schedule is being filed. The period relates to either a current or future PAYE period. Valid format is CCYYMMDD. PAYE and tax on schedular payments deducted Child Support Deductions Student loan deductions KiwiSaver Deductions KiwiSaver net Employer Contributions ESCT (employer s superannuation contribution tax) Total amounts deducted PDEC 14 The sum of the PAYE and tax on schedular payments deducted for all the employees for the period filed must not be blank. Nil values should be represented by zero, i.e. 0. NB: For payroll giving, this field will be PAYE minus tax credits for payroll donations PDEC 14 The sum of the child support deductions for all employees for the period being filed must not be blank. Nil values should be represented by zero, i.e. 0. PDEC 14 The sum of all the student loan repayment deductions for all employees for the period being filed must not be blank. Nil values should be represented by zero, i.e. 0. PDEC 14 The amount of KiwiSaver contributions deducted from the employees earnings for the period. Nil values should be represented by zero, i.e. 0. PDEC 14 The net amount of employer contributions being paid on behalf of the employees for the period. Nil values should be represented by zero, i.e. 0. PDEC 14 The sum of the ESCT deducted for all employees for the period being filed must not be blank. Nil values should be represented by zero, i.e. 0. PDEC 14 The total of all amounts deducted: PAYE and tax on schedular payments deducted. NB: For payroll giving, this amount will be PAYE minus tax credits for payroll donations Child Support deductions Student loan deductions KiwiSaver deductions KiwiSaver net employer contributions ESCT deducted Must not be blank. Nil values should be represented by zero, i.e April 2018 to 31 March 2019 Final

36 Example EPS NB: the example is intended to show the layout of the file calculated figures may not be accurate EPS, , ,600000,100000,200000,8000,0,0,100000,0004 DEP, , ,100000,0,0,0,0,0, DEP, , ,200000,5000,10000,4000,0,0, DCP, , ,100000,0,0,0,0,0,0, DCP, , ,200000,5000,10000,4000,0,0,0, (Note: a PAR record is no longer a valid field. Refer to section 4.1) April 2018 to 31 March 2019 Final

37 4.2 Electronic Amendment Schedule (EAS) File Specifications This section specifies the file format and layout for the EAS that will be sent through the myir system. The file layout should conform to the layout specified in Appendix 7.3 There is no restriction to the number of EAS you may send for the same period. A PAYE intermediary will not be allowed to submit an EAS if there is no Employer monthly schedule (EMS) previously filed for that return period. An EAS enables an intermediary to: Add new detail lines to an EMS previously filed to add new lines, the intermediary will provide nil DTL lines and DAL lines with new values. Delete detail lines from an EMS previously filed to delete lines, the intermediary will provide DTL lines with existing values and nil DAL lines. Update detail lines to EMS previously filed to update lines, the DTL lines will show the existing values and DAL lines will contain modified values. Nil DTL or DAL lines will be in the following format: DTL, ,,,,,0,0,0,0,0,,0,0,0,0,0 DAL, ,,,,,0,0,0,0,0,,0,0,0,0, April 2018 to 31 March 2019 Final

38 4.2.1 EAS Header record The header record precedes the detail records. It contains data about the client (employer). As there is no change to the number of fields in the EAS Header record, there is no change to the IR form version number, which remains as Item Description Attribute Field size Default values/notes Header record indicator Client (employer) IRD number ALPHA 3 This must have a value of EAS to indicate header record. IRD 9 A valid IRD number. This is a 9-digit number. It cannot be Return period DATE 8 The last day of the month for which the schedule is being filed. Valid format is CCYYMMDD. Employer name ANAM 20 The preference is first name Surname. Contact person ANAM 20 The name of the payroll contact person for IR contact purposes. The preference is first name surname Contact number ANUM 20 The daytime work phone number for the contact person. IR form version number Original ESCT deducted (KiwiSaver opt outs/account closures) Original ESCT deducted (ESCT adjustments) New ESCT deducted (KiwiSaver opt outs/account closures) New ESCT deducted (ESCT adjustments) NUM PDEC 14 Original amount of ESCT deducted (KiwiSaver opt outs/account closures only). Nil values should be represented by zero, i.e. 0 PDEC 14 Original amount of ESCT deducted (for adjustments due to under or over payments of ESCT). Nil values should be represented by zero, i.e. 0 PDEC 14 Total of: original ESCT minus the ESCT deducted for KiwiSaver opt outs or account closure. Nil values should be represented by zero, i.e. 0 PDEC 14 Total of: original ESCT minus the new amount of ESCT deducted for KiwiSaver adjustments. Nil values should be represented by zero, i.e April 2018 to 31 March 2019 Final

39 4.2.2 Detail records The detail records are shown as DTL and DAL. Both the details records contain employee details. DTL shows the original line item and will be used when existing details supplied previously are amended. DAL shows amendments to the previous EMS lines or brand new data that did not appear in previous EMS DTL Record Original Line Item The detail record contains employee information in the following format and layout. Item Description Attribute Field size Default values/notes Detail record indicator Employee IRD number ALPHA 3 This must have a value of DTL to indicate detail record IRD 9 Can be , otherwise a valid IRD number, modulus 11 checked. This is a 9-digit number. Employee name ANAM 20 Surname first name format preferred. Employee tax code RANGE 5 See section 6.1 for a list of accepted tax codes. Start date DATE 8 The employment start date for the employee if this is in the monthly period. Valid format is CCYYMMDD or blank Finish date DATE 8 The employment finish date for the employee if this is in the monthly period. Valid format is CCYYMMDD or blank Gross earnings and / or schedular payments Earning and / or schedular payments not liable for ACC E/L PDEC 14 The taxable gross earnings for the employee for the period. Must not be blank. Nil values should be represented by zero, i.e. 0 PDEC 14 The employee s earnings for the period which are not liable for ACC Earners Levy. Must not be blank. Nil values should be represented by zero, i.e. 0 Lump sum (extra pay) indicator NUM 1 This indicates whether the employee has received a lump sum payment that has been taxed at the lowest rate during the monthly period. 1 for yes otherwise must be 0 PAYE / tax PDEC 14 PAYE or tax on schedular payments deducted from employee s earnings for period. Must not be blank. Nil values should be represented by zero, i.e. 0 Child support deductions Child support code PDEC 14 The amount of child support deducted from the employee s earnings for the period. Must not be blank. Nil values should be represented by zero, i.e. 0 RANGE 1 The child support code. This must be A, C, D, O, P, S or blank April 2018 to 31 March 2019 Final

40 Item Description Attribute Field size Default values/notes Student Loan deductions KiwiSaver Deductions KiwiSaver Employer Contributions Tax credits for payroll donations Family tax credits PDEC 14 The amount of student loan repayments deducted from the employee s earnings for the period. Must not be blank. Nil values should be represented by zero, i.e. 0 PDEC 14 The amount of KiwiSaver contributions deducted from the employee s earnings for the period. Nil values should be represented by zero, i.e. 0. PDEC 14 The net amount of employer contributions being paid on behalf of the employee for the period. Nil values should be represented by zero, i.e. 0. This field is the total of voluntary contributions and the compulsory contribution. PDEC 14 The amount of tax credits for payroll donations granted to the employee for the donation(s) made. PDEC 14 The amount of family tax credits paid to the employee for the period. This must be 0 except when the employer is Work and Income April 2018 to 31 March 2019 Final

41 4.2.4 DAL EMS amendments or new data The detail record contains amended information about employees and is similar to the DTL file format. Item Description Attribute Field size Default values/notes Detail record indicator Employee IRD number ALPHA 3 This must have a value of DAL to indicate detail record IRD 9 Can be , otherwise a valid IRD number, modulus 11 checked. This is a 9-digit number. Employee name ANAM 20 Surname first name format preferred Employee tax code RANGE 5 See section 6.1 for a list of accepted tax codes. Start date DATE 8 The employment start date for the employee if this is in the monthly period. Valid format is CCYYMMDD or blank Finish date DATE 8 The employment end date for the employee if this is in the monthly period. Valid format is CCYYMMDD or blank Gross earnings and / or schedular payments Earning and / or schedular payments not liable for ACC Earners Levy Lump sum (extra pay) indicator PDEC 14 The taxable gross earnings for the employee for the period. Must not be blank. Nil values should be represented by zero, i.e. 0 PDEC 14 The employee s earnings for the period which are not liable for ACC Earners Levy. Must not be blank. Nil values should be represented by zero, i.e. 0 NUM 1 This indicates whether the employee has received a lump sum payment that has been taxed at the lowest rate during the monthly period. 1 for yes otherwise must be 0 PAYE / tax PDEC 14 PAYE or tax on schedular payments deducted from employee s earnings for period. Must not be blank. Nil values should be represented by zero, i.e. 0 Child support deductions PDEC 14 The amount of child support deducted from the employee s earnings for the period. Must not be blank. Nil values should be represented by zero, i.e. 0 Child support code RANGE 1 The child support code. This must be A, C, D, O, P, S or blank Student Loan deductions KiwiSaver Deductions PDEC 14 The amount of student loan repayments deducted from the employee s earnings for the period must not be blank. Nil values should be represented by zero, i.e. 0 PDEC 14 The amount of KiwiSaver contributions deducted from the employee s earnings for the period. Add a tolerance rule allowing the KSE employee deductions field to accept an amount greater than 8% if the excess is less than $1. e.g. Gross $ x 8%= Truncate to 2 decimal places = If the KiwiSaver Deduction is then ERROR April 2018 to 31 March 2019 Final

42 Item Description Attribute Field size Default values/notes KiwiSaver net Employer Contributions Tax credits for payroll donations PDEC 14 The net amount of employer contributions being paid on behalf of the employee for the period. Nil values should be represented by zero, i.e. 0. This field will be the total of voluntary contributions and the compulsory contribution. PDEC 14 The amount of tax credits for payroll donations granted to the employee for the donation(s) made. Family tax credits PDEC 14 The amount of family tax credits paid to the employee for the period. This must be 0 except when the employer is Work and Income. Example EAS NB: the example is intended to show the layout of the file calculated figures may not be accurate EAS, , ,PI Client 01,Penelope Peach, ,0004,0,0,0,0 DTL, ,Ella Vince,M,,,200000,110500,0,33500,0,,0,0,0,1000,0 DAL, ,Ella Vince,SB,,,200000,110500,0,33500,0,,0,0,0,2000,0 DTL, ,Ella Vince,SLCIR,,,,,,,,4000,0,0,0,0,0 DTL, ,Ella Vince,SLBOR,,,,,,,,10000,0,0,0,0,0 DTL, , Pierre Persimmon,,,,200000,0,0,33500,0,,0,0,0,0 DAL, ,Pierre Persimmon,SB SL,,,200000,110500,0,33500,0,0,0,0,0,3200,0 DTL, ,,,,,0,0,0,0,0,,0,0,0,0,0,,0 DAL, ,David Tua,M,,,200000,110500,0,33500,0,,0,0,0,319900,0 DTL, ,Mr Allen Dick,M SL,,,100000,37500,0,14200,0,,1200,0,0,1313,0 DAL, ,,,,,0,0,0,0,0,,0,0,0,0,0 DTL, ,,,,,0,0,0,0,0,,0,0,0,0,0 DAL, ,Wally Alexander,M SL,,,20000,0,0,3000,0,,0,0,0 DTL, ,Lois Kent,SB, , ,205800,10000,1,160000,0,,10000,0,0,10000,0 DAL, ,Lois Kent,M, , , ,30000,0,360000,0,,,30000,30000,0, April 2018 to 31 March 2019 Final

43 4.3 Electronic Subsidy Claim Form (SCF) file specifications This section specifies the file format and layout for the SCF that will be sent through the myir system. The file layout should confirm to the layout specified in Appendix 7.3 The myir system will reject a subsidy claim form for the following reasons: invalid or zero IRD numbers for the PAYE intermediary or employer invalid IRD numbers for employees (zero numbers are acceptable) EMS not filed for the period of the subsidy claim form employers not linked to PAYE intermediary PAYE intermediary not listed incorrect file format more than five employees listed per employer same employer occurring on subsidy claim form more than once more than one subsidy claim form received for the same period. Note: There will be a maximum of five entries per employer on each month s subsidy claim form i.e. one entry per subsidised employee (a maximum of five employees). There are no new error messages (as of 1 April 2010) April 2018 to 31 March 2019 Final

44 4.3.1 SCF Header record The header record precedes the detail records. It will contain data about the listed PAYE intermediary and subsidy Item Attribute Field Default values/notes description size Header record indicator PAYE intermediary IRD number Period to which SCF relates Total Amount of Subsidy claimed ALPHA 3 This must have a value of SCF to indicate header record. IRD 9 This is a 9-digit number. It cannot be DATE 8 The last day of the month the employer monthly schedule which the subsidy claim form relates. Format CCYYMMDD. PDEC 14 Total amount of the subsidy claimed by the listed PAYE intermediary in the period which the form relates to. It cannot be zero Detail records The detail records are shown as EMR and EME. The EMR record contains the employer details and the EME record contains the employee details EMR Employer detail records Item Attribute Field Default values/notes description size Detail record indicator Employer IRD number Employer name ALPHA 3 This must have an EMR to indicate detail record. IRD 9 This is a 9-digit number. It cannot be ANAM 20 The name of the employer. The field is compulsory and must not contain embedded commas April 2018 to 31 March 2019 Final

45 4.3.4 EME - Employee detail records Item description Attribute Field size Default values/notes Detail record indicator Employee IRD number Employee name Number of times paid ALPHA 3 This must have an EME to indicate detail record. IRD 9 This is a 9-digit number starting with a number equal to or greater than 0. It can be This can include those receiving schedular payments. ANAM 20 The first and last name of the employee. The field is compulsory and the preference is for the format "surname first name. Must not contain embedded commas. NUM 2 The number of times the employee was paid during the return period which the subsidy claim form relates to. Example SCF April 2018 to 31 March 2019 Final

46 5. KiwiSaver No changes are required to existing paper or electronic Employer Monthly Schedules as the existing field Net KiwiSaver Employer Contributions will be used to record the total of voluntary and compulsory employer contributions. KiwiSaver members can make a contribution of 3%, 4% or 8% of their wages. They may change their contribution rate at any time by advising their employer. The default contribution rate is 3% if no rate is elected. 5.1 Employers who must contribute to member savings The Crown legislated employers with employees who contribute to KiwiSaver schemes and/or complying funds to make Compulsory Employer Contributions (CEC) from 1 April For KiwiSaver purposes, CEC must start from: the first pay after an employee starts new employment, or the first pay after the employer receives notice from IR or the employee that they have become a member of a KiwiSaver scheme. The minimum Compulsory Employer Contribution for pay periods commencing on or after 1 April 2013 is 3%. 5.2 Employers who need not contribute to member savings Employers do not need to contribute to KiwiSaver and Complying Funds as well as other schemes if an employee belongs to several schemes (if certain requirements are met). An employee who belongs to a Registered Superannuation Scheme (RSS) or Complying Fund may also join a KiwiSaver scheme. Employers are not required to make compulsory contributions if they already contribute to a scheme on behalf of the member (if certain conditions are met) April 2018 to 31 March 2019 Final

47 To avoid employers being forced to contribute more than once, any employer contribution to an RSS, Complying Fund or KiwiSaver scheme may qualify as compulsory employer contributions if, as per section 101D(5) of the KiwiSaver Act 2006: 1. employer superannuation contributions (the contributions) are made to a registered superannuation scheme (the contributions scheme); and the contributions scheme was registered before 17 May 2007, or the contributions scheme is one (a succeeding scheme) for which there is, due to all relevant members transferring to the succeeding scheme by virtue of section 9BAA of the Superannuation Schemes Act 1989, a prior registered superannuation scheme (a prior scheme) and that prior scheme or another prior scheme for the contributions scheme were registered before 17 May 2007; and the employer provided access for employees generally to the contributions scheme or a prior scheme for the contributions scheme before 17 May 2007; and the employee is - 1. employed by the employer before 1 April 2008, and the employer makes or has agreed with the employee to make employer superannuation contributions for the employee before 1 April 2008 to the contributions scheme or a prior scheme for the contributions scheme; or 2. covered by a collective agreement that is in force before 17 May 2007 and expires after 1 April someone who has had contributions paid or credited to the contributions scheme or a prior scheme for the contributions scheme by a previous employer, and those contributions met the requirements described in paragraphs 1, 2 and 3 above. Employer contributions, which satisfy paragraphs 1 to 4 above, must also vest completely in the employee no later than 5 years after the employee joins the contributions scheme April 2018 to 31 March 2019 Final

48 Employer contributions to an RSS scheme, which meets the requirements listed above, count towards the compulsory employer contribution, even if the scheme does not have similar lock-in rules to Complying Funds or KiwiSaver schemes. This policy prevents an employer being forced to contribute twice, once because an employee belongs to an RSS, which requires employer contributions and a second time because the same employee joins a KiwiSaver scheme or complying fund. If an employee is a member of a defined benefit scheme, their employer is not liable to pay CEC for that or any other scheme that employee may belong to. The table below summarises employer obligations where employees belong to several superannuation schemes: Contribution Type Defined Benefit Fund Registered Superannuation Scheme Complying Fund KiwiSaver Scheme CEC implications If an employee is a member of a defined benefit scheme, there are no CEC obligations in regards to that employee No CEC requirements for these but contributions to RSS can offset other CEC liabilities. See formula below CEC applies CEC applies CEC = (payment of gross salary or wages x CEC rate) other contributions April 2018 to 31 March 2019 Final

49 5.3 Definition of Salary and Wages for KiwiSaver purposes Gross salary and wages The definition of gross salary and wages for KiwiSaver purposes includes: bonuses commissions gratuities overtime payments, and any other remuneration of any kind. The following payments to employees are specifically excluded from the definition of salary and wages for KiwiSaver purposes, and as such an employer contribution is optional. Redundancy payments Reasonable employer provided accommodation or accommodation allowances Actual costs reimbursed for allowances or expenses relating to living outside New Zealand Payments made under the Voluntary Bonding Schemes administered by the Ministry for Primary Industries, Ministry of Health, and Ministry of Education. Gross base salary and wages (salaries and wages without any higher allowances) are used to determine the amount of employer deductions and compulsory employer contributions (CECs) for members of a complying fund scheme April 2018 to 31 March 2019 Final

50 5.3.2 KiwiSaver - Employees under 18 New and existing employees under 18 can only join KiwiSaver by choosing and contacting directly a KiwiSaver scheme provider. Once an employee under 18 is accepted by the scheme provider and the employee has nominated their employer, lr will notify their employer and request they start deducting the employee KiwiSaver contributions. IR will provide the contribution rate for the employee, their name and IRD number. Deductions of employee KiwiSaver contributions are based on the following: For the under 18 employee, employers need to deduct employee contributions. Employers are not required to make CECs on behalf of employees under 18. Any KiwiSaver employer contributions made to employees under 18 are voluntary employer contributions. Note: With the removal of the tax credit for children under the age of 18, they are now liable for PAYE deductions and if they are an existing KiwiSaver member they are also required to have KiwiSaver employee contributions. If you have an employee who turns 18 while working for you, you do not need to take any additional action unless specifically requested by the employee, though you are required to begin making CECs on their behalf if they are a member CEC Validations The following validation will occur in Inland Revenue systems and if failed, will cause the employer s monthly schedule to be queried unless there is an existing arrangement to overlook specific CEC validations: If the employee is making KiwiSaver or complying fund deductions, the compulsory employer contributions must be at least 3% of the employee s gross income. The amount shown on the EMS will always be the employer contribution less any tax withheld (i.e. the net amount) April 2018 to 31 March 2019 Final

51 5.4 Online Forms KiwiSaver Employment Details Form (KS1) The KiwiSaver Employment Details Form (KS1 form) allows employers who are registered for myir, to submit the details of a new employee who is both eligible to join KiwiSaver and who is subject to the automatic enrolment rules, or provide details for an employee who chooses to opt in through them. An employee is eligible to join through automatic enrolment if: employee is aged 18 or over but has not reached the age of eligibility for New Zealand Superannuation (currently 65); and the employee is a New Zealand citizen or is entitled, in terms of the Immigration Act 1987, to be in New Zealand indefinitely; and the employee is, or normally is, living in New Zealand, or is an employee of the State services (within the meaning of the State Sector Act 1988) who is serving outside New Zealand (further conditions apply). The KS1 form will also incorporate the option for employers to indicate to Inland Revenue those employees who have been automatically enrolled but have opted out of KiwiSaver. Both an on-screen form and a file transfer option are available, and can be accessed from a KiwiSaver option on the left side of the ir-file menu myir menu Home/Employment activities/kiwisaver actions/upload a Kiwisaver file. This document specifies the file format and layout that will be sent electronically through myir, not the on-screen form processing April 2018 to 31 March 2019 Final

52 5.4.2 KiwiSaver employment details (KED) form The KiwiSaver employment details form allows employers to electronically notify Inland Revenue of: new employees, who meet KiwiSaver automatic enrolment eligibility criteria existing employees, who are not subject to the automatic enrolment rules but decide to join KiwiSaver without actively choosing a KiwiSaver provider (also treated as a default enrolment ) employees who have been automatically enrolled, but have opted out of KiwiSaver. The KiwiSaver employment details form allows the employer to electronically provide the information from both the KS1 KiwiSaver employment details form and KS10 New employee opt-out notice, which are both available in a paper format. It will be possible for an employer to submit both the enrolment details for a new employee, as well as giving notice to Inland Revenue that the same employee has opted out of KiwiSaver. If an employee is an existing KiwiSaver member, or is not eligible to be a KiwiSaver member, the employer is not required to submit enrolment details for this individual. The KiwiSaver employment details form is structured into three parts: Section A: Employer Details Employer s IRD number Employer s business name Employer s contact name Employer s contact numbers April 2018 to 31 March 2019 Final

53 Section B: Employee Details Employee s eligibility: is the employee a new employee or existing employee? Employee s title Employee s first name Employee s surname Employee s postal address Employee s contact numbers Employee s address Employee s IRD number Employee s name / EMS identifier Section C: Opt-out Has the employee opted-out? Employee s employment start date Employee s bank account number Name of account holder Date opt-out notice signed by the employee April 2018 to 31 March 2019 Final

54 5.4.3 KiwiSaver KSH employer header record The employer header record precedes the employee details record, and contains data about the employer. Item description Attribute Field size Default values/notes Header record indicator ALPHA 3 This must have a value of KSH to indicate the employer header record. Compulsory field. Employer IRD number IRD 9 A valid IRD number. Compulsory field. Validation rules are outlined in Appendix 7.1. Employer s contact name Employer day phone number Employer mobile number IR form version number ANUM 20 The name that IR will use to contact in event of any issues with the KiwiSaver onscreen form. Should be the person entering the KiwiSaver information on behalf of the employer. Must not contain embedded commas ANUM 12 The phone number where the employer can be contacted during business hours. ANUM 15 The mobile phone number of the employer. NUM April 2018 to 31 March 2019 Final

55 5.4.4 KiwiSaver KSD employment details record This section contains the details of the employees who are being automatically enrolled, existing employees who are opting in, employees who are automatically enrolled and opting out, or employees who are simply opting out of KiwiSaver. Item description Attribute Field size Default values/notes Detail record indicator ALPHA 3 This must have a value of KSD to indicate the employee details record. Compulsory field. Employee as identified on EMS Employee s IRD number ANAM 20 The employee s name as it appears on the EMS. Compulsory field. IRD 9 A valid IRD number. Compulsory field. Validation rules are outlined in Appendix 7.1. Employee s eligibility ALPHA 2 Indicates whether a new employee (who is subject to automatic enrolment) or an existing employee (who is choosing to opt in). Default value is blank and indicates an opt-out advice only. Employee s title ALPHA 6 Mr, Mrs, Miss Ms or other. Show NE for a new employee, EE for an existing employee. Employee s first names ANAM 37 First name/s of employee. Must not contain embedded commas. * Compulsory field. Employee s surname ANAM 31 Surname of employee. Must not contain embedded commas. * Compulsory field. Employee s address ANUM 30 - Line one. Either street number or name can be entered or PO Box Number. The address must be the mailing address for the Employee where all KiwiSaver documents will be mailed. - Must not contain punctuation characters such as commas, full stops, speech marks, dashes etc. * Compulsory field. Employee s address ANUM 30 - Line two. Any RD number, the suburb and town/city are entered. Employee s day phone number Employee s mobile number Employee s address The address must be the mailing address for the employee where all KiwiSaver documents will be mailed. - Must not contain punctuation characters such as commas, full stops, speech marks, dashes etc. * Compulsory field. ANUM 12 The phone number where the employee can be contacted during business hours. ANUM 15 The mobile phone number of the employee. 60 The address of the employee. Syntax must string, and not contain double periods April 2018 to 31 March 2019 Final

56 Item description Attribute Field size Default values/notes Has the employee opted out? Employment start date Employee s bank account number Name of account holder Date opt-out notice signed by the employee ALPHA 1 Indicates whether an employee who is subject to the automatic enrolment rules wishes to opt out of KiwiSaver. Show Y = 'Yes', if employee wishes to opt out. Show N = No, if employee is not opting out. Must be N if the employee s eligibility value is EE. DATE 8 The start date of the employee. Compulsory field if the opt-out indicator is Yes, otherwise must be blank. Must be in format CCYYMMDD. NUM 18 The bank account number for the employee if they are opting out of KiwiSaver (opt-out indicator ticked) and they have previously had KiwiSaver deductions that need refunding. Validated against bank/branch and check-digit algorithm (Section 7.4). Must be blank if the opt-out indicator is not ticked. ANAM 31 The name of the account holder for the bank account number given above. Must be blank if the opt-out indicator is not ticked. Must not be blank if the bank account number is not blank. DATE 8 The date on which the opt-out notice given to the employer (opt-out notice must be signed by the employee). Must be in format CCYYMMDD Must be blank if the opt-out indicator is not ticked. * Compulsory fields these fields are compulsory and the information supplied to Inland Revenue if the employee has provided the information to the employer Section 23(1) KSA April 2018 to 31 March 2019 Final

57 Example KSH April 2018 to 31 March 2019 Final

58 Note: The following sections to to be updated with myir information when available KiwiSaver Form Filing Transfer Confirmation All ir-file users are able to file KS forms individually or in a single batch file. When all fields have been validated and any errors corrected, the user will be taken to the File Transfer Confirmation Page. The fields in the Schedule Summary table will contain the following information: Field Description Example IRD Number Message The IRD number of the employer for whom the file was submitted. The confirmation message stating that the file transfer has been successful. Note: F116 describes the message type. Where the KS form file transfer is successful, the F116 message is displayed Processed: F116 The File Transfer was successful. To view a history of your KiwiSaver form submissions, please click on the KiwiSaver Form History link on the left hand menu April 2018 to 31 March 2019 Final

59 5.4.6 KiwiSaver Form History A history of the KiwiSaver forms submitted will be accessed via the KS Form History link on the ir-file left hand navigation menu. This link will be located underneath the KiwiSaver link, at the same level as the KS1 link and is indicated in the following screenshot: April 2018 to 31 March 2019 Final

60 5.4.7 KiwiSaver Form History List When the user selects the KiwiSaver Form History link, a list of all forms submitted will be displayed. No header is required for this page. No differentiation between methods of submission (i.e. online form versus file upload) is required. No intermediate screen to allow agents to select an employer is required. An indicative screen layout is displayed in the following screenshot: Figure 1: KS Form History List At the bottom of the page, the following note will display: Note: Each record will be automatically deleted three months after the date submitted. If you would like to save a record, click the Save action for that record April 2018 to 31 March 2019 Final

61 6. Calculation Details This section provides the table of tax codes (immediately below in section 6.1) and the details of the calculations required for specific tax codes (section 6.2 onwards). Calculation accuracy - unless otherwise stated, calculations should be performed using six decimal places during the calculation process. Gross amount less than $ for the purposes of filing the EMS, enter $ Table of Tax Codes as at 1 April Employee tax code for use on the Employer Monthly Schedule. Description M Main income ME Main income Independent Earner Tax Credit (IETC) NSW Non-resident seasonal workers income. Flat tax. There are no thresholds SB * Secondary income * $14,000 S * Secondary income * $14,001 to $48,000 SH * Secondary income * $48,001 to $70,000 ST * Secondary income * > $70,000 CAE Casual agricultural employees EDW Election day workers M SL Main income with Student Loan ME SL Main Income with Student Loan & IETC SB SL* Secondary income * $14,000 with Student Loan S SL * Secondary income $14,001 to $48,000 with a Student Loan SH SL * Secondary income * $48,001 to $70,000 with Student Loan ST SL * Secondary income * >$70,000 with Student Loan SLCIR Commissioner of IR required deduction SLBOR Borrower additional deduction ND No notification rate STC Special tax code from IR 23 WT Schedular Payments ESS Employee Share Scheme Extra pay on primary income Extra pay on secondary income * * For the purpose of this table, the definition of the term Secondary income amount is the total of all employment income from all sources (primary and secondary) April 2018 to 31 March 2019 Final

62 6.2 M and M SL tax codes PAYE calculations 1 Calculate Taxable Annual Income M SL Tax Code? 2 Calculate Student Loan Deduction M 4 Calculate tax on Annual Income 5 Calculate Annual Earner s Levy 6 Calculate Weekly Total 7 Gross up to Pay Period amounts to be deducted April 2018 to 31 March 2019 Final

63 Sequence Task Associated Rules 1 Calculate taxable income Weekly, multiply by 52 Fortnightly, multiply by 26 Monthly, multiply by 12 Four Weekly, multiply by 13 2 Calculate Student Loan deduction. See section 6.4 DROP CENTS to truncate to whole dollar - no rounding required 3 Calculate tax on annual income. If annual income is between $1 and $14,000 inclusive, multiply annual income by 10.5%. If annual income is between $14,001 and $48,000 inclusive, multiply annual income by 17.5% and subtract $980. If annual income is between $48,001 and $70,000 inclusive, multiply annual income by 30% and subtract $6,980. If annual income is greater than $70,000, multiply annual income by 33% and subtract $9,080. Do not round this figure. 4 Calculate annual ACC Earners Levy. If annual income is less than $126,286, multiply annual income by 1.39%. If annual income is equal to or more than $126,286, then the annual ACC Earners Levy equals $ Do not round this figure. 5 Calculate total annual tax amount payable. 6 Calculate total weekly tax amount payable. 6.1 Truncate amounts to whole cents e.g. $ becomes $ Calculate other total tax amounts to be deducted based on the respective pay frequency. (Annual tax) plus (annual ACC Earners Levy). Do not round this figure. Divide total annual tax amounts payable by 52. Multiply the total weekly tax amount payable by 52 and divide by number of pays per year: Monthly = 12 Four-weekly = 13 Fortnightly=26 For example, converting a total weekly tax amount payable of $75.67 to total monthly tax amount payable - Multiply $75.67 by 52 divide by 12 equals $ $ becomes $ Truncate figures to whole cents e.g. $ becomes $ April 2018 to 31 March 2019 Final

64 6.3 ME/ME SL tax codes PAYE calculations April 2018 to 31 March 2019 Final

65 Sequence Task Associated Rules 1 Calculate annual income from pay period. 2 Calculate Student Loan Deduction. 3 Calculate annual ACC Earners Levy. 4 Calculate Independent Earner Tax Credit. Weekly, multiply by 52 Fortnightly, multiply by 26 Monthly, multiply by 12 Four Weekly, multiply by 13 DROP CENTS, to truncate to whole dollar - no rounding required. See section 6.4 If annual income is less than $126,286, multiply annual income by 1.39%. If annual income is equal to or more than $126,286 then the annual ACC Earners Levy equals $ Do not round this figure. If annual income is between $1 and $23,999 tax credit equals $0.00. If annual income is between $24,000 and $44,000 inclusive, the tax credit is $520. If annual income is between $44,001 and $47,999 inclusive, the tax credit is equal to $520 less ((Annual income - $44,000) x 0.13). If annual income is equal to or greater than $48,000 the tax credit equals $0.00. Do not round this figure. 5 Calculate annual tax. If annual pay is between $1 and $14,000 inclusive, multiply annual pay by 10.5%. 6 Calculate annual total amounts to be deducted. If annual pay is between $14,001 and $48,000 inclusive, multiply annual pay by 17.5% and subtract $980. If annual pay is between $48,001 and $70,000 inclusive, multiply annual pay by 30% and subtract $6,980. If annual pay is greater than $70,000, multiply annual pay by 33% and subtract $9,080. Do not round this figure. (Annual tax) plus (annual ACC Earners Levy) less (Independent Earner Tax Credit) Do not round this figure. 6.1 Calculate weekly total amounts to be deducted. Divide annual total amounts to be deducted by Truncate amounts to whole cents e.g. $ becomes $ Gross weekly total amounts to be deducted figure to pay period. Multiply weekly figure by 52 and divide by number of pays per year: Monthly = 12 Four-weekly = 13 Fortnightly=26 For example, to gross weekly amount of $75.67 to monthly, multiply by 52 / 12 giving $75.67 * 52 / 12 equals $ April 2018 to 31 March 2019 Final

66 Sequence Task Associated Rules 7.1 Truncate figures to whole cents e.g. $ becomes $ April 2018 to 31 March 2019 Final

67 6.4 M SL and ME SL Tax Code Student Loan calculations 1 Calculate Gross Pay 2 Truncate Amount to whole dollars 3 Calculate pay period student loan deduction Sequence Task Associated Rules 1 Calculate employee s pay amount for pay period. 2 Truncate amounts to whole dollars, so $ becomes $ Calculate pay period Student Loan repayment threshold. 3.1 Divide threshold ($19,448) by number of pays per year. 3.2 Calculate pay period Student Loan deduction. 3.3 Truncate pay period student loan deduction to whole cents e.g. $ becomes $ Weekly threshold is $374, fortnightly $748, four-weekly $1,496 and monthly $1, No special deduction rate certificate If pay period pay is less than pay period student loan repayment threshold, then deduction is $0.00. If pay period pay is more than pay period student loan repayment threshold then deductions equal 12% of ((pay period pay) less (pay period student loan repayment threshold)). If a borrower has provided a special deduction rate certificate If pay period pay is less than pay period student loan repayment threshold, then deduction is $0.00. If pay period pay is more than pay period student loan repayment threshold then deductions equal (percentage provided in the certificate) * ((pay period pay) less (pay period student loan repayment threshold)). Note: Calculate PAYE as per PAYE calculations above (Sections 6.2 and 6.3) April 2018 to 31 March 2019 Final

68 6.5 NSW Non-resident Seasonal Worker calculation Non-resident Seasonal Workers (NSW) are taxed at a flat rate. There are no thresholds and there are no tax credits to apply. The total to pay also includes the ACC Earners Levy at 1.39% from each pay period (0.0139). The flat rate is 10.5% (0.105). Eligible non-resident seasonal workers must use the NSW tax code. If the NSW tax code is used then the EMS line for the employee cannot contain: KiwiSaver contributions Student Loan Repayments As a non-resident the worker is not eligible to enrol in KiwiSaver, nor are they subject to student loan repayments. Child Support payments can be deducted. Based on the Interim Operational position, t The flat rate of 10.5% also applies to extra pay. This is only applicable to PAYE income payments made between from 01 April 2016 and 31 March 2018 for non-resident seasonal workers with the NSW tax code. (Note: This date was put in place temporarily while the Commissioner works to clarify the PAYE legislation in relation to non-resident seasonal workers to give full effect to the intention of Parliament, and therefore may change.) For example: Mike contracted as fruit packer for ten weeks at $20/hour with NSW tax code. His final gross pay on the tenth week is $800 with $640 being the 8% holiday pay. The Interim Operational position entitles Mike to will receive net earnings of $ holiday pay on top of his final pay. This is based on 10.5% tax rate and 1.39% ACC earners levy deducted which is $ If Mike s employer applied the normal extra pay rate rules of 17.5% then Mike would have only received net earnings of $528 based on a deduction of $112. Please note: From 14 May 2016, non-resident seasonal workers under the recognised seasonal employer (RSE) rules have a tax code of NSW for the first month of a period of employment in New Zealand after this, the no-notification rate can apply April 2018 to 31 March 2019 Final

69 1 Calculate Gross Pay 2 Calculate Tax 3 Calculate ACC earners levy 4 Calculate Total deductions and truncate to whole cents Sequence Task Associated Rules 1 Calculate employee s pay amount for pay period. 2 Truncate pay period amount to whole dollars, $ becomes $ Calculate amounts to be deducted. For NSW multiply pay period amount by 10.50%. { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } 4 Truncate figures to whole cents. For example, $ becomes $ April 2018 to 31 March 2019 Final

70 6.6 SB, S, SH, ST and SB SL, S SL, SH SL, ST SL Tax Codes PAYE and SL calculations 1 Calculate Period Secondary - Student loan tax code Tax 2 Calculate Student Loan Deduction Secondary - No student loan tax code 3 Calculate tax on Period Income Sequence Task Associated Rules 1 Calculate employee s pay amount for pay period. 2 Truncate pay period amount to whole dollars, $ becomes $ Calculate student loan deductions. No special deduction rate certificate Multiply pay period amount by 12%. 3.1 Truncate amount to whole cents e.g. $ becomes $ If a borrower has provided a special deduction rate certificate Multiply pay period amount by the percentage provided in the certificate April 2018 to 31 March 2019 Final

71 Sequence Task Associated Rules 4 Calculate total amounts to be deducted. For SB and SB SL multiply pay period amount by 11.89% { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay} For S and S SL multiply pay period amount by 18.89%. { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } For SH and SH SL multiply pay period amount by 31.39%. { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } For ST and ST SL multiply pay period amount by 34.39%. { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } (All multiple pay period amounts above include tax and ACC Earners Levy). 4.1 Truncate amount to whole cents e.g. $ becomes $ April 2018 to 31 March 2019 Final

72 6.7 EDW and CAE and ND 1 (No Notification) tax codes PAYE calculations 1 Calculate Pay for Period 2 Calculate Total deductions and truncate to whole cents Sequence Task Associated Rules 1 Calculate employee s pay amount for pay period. Include ALL taxable allowances. Exclude Non-taxable allowances and Extra Pays 2 Truncate pay period amount to whole dollars, $ becomes $ Calculate total amounts to be deducted. EDW - Multiply pay period amount by 18.89% includes tax and EL) { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } CAE - Multiply pay period amount by 18.89% (includes tax and EL) { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } ND - Multiply pay period amount by 46.39% (includes tax and EL) { ( Earners Levy Rate) * Pay =( * Pay = * Pay } 4 Truncate amount to whole cents e.g. $ becomes $ For calculations of Extra pay payments e.g. bonus payment or unused and final holiday pay on termination please refer to section April 2018 to 31 March 2019 Final

73 6.8 ND (No Notification) tax code Flat rate deductions Employees on the no notification rate (ND code) are taxed at a flat rate (45% or 0.45) plus ACC earners levy (1.39% or ). The flat rate of 45% also applies to extra pays. This is applicable to PAYE income payments made for employees using the ND tax code. Sequence Task Associated Rules 1 Calculate employee s pay amount for pay period. 2 Truncate pay period amount to whole dollars, $ becomes $ Calculate amounts to be deducted. Multiply pay period amount by 46.39% (includes tax and EL) { ( Earners Levy Rate) * Pay =( ) * Pay = * Pay } 4 Truncate figures to whole cents. For example, $ becomes $ April 2018 to 31 March 2019 Final

74 6.9 Special Tax Code/Special Deduction Rate flat rate deductions and flat rate above repayment threshold student loan calculations 1 Calculate Taxable Income for the pay period Special Rate for Student Loan Only Special Rates for PAYE and for Student Loan Deduction Special Rates for PAYE Only Special Tax Rate for schedular payments Tax Code = M SL, ME SL, S SL, SB SL, SH SL or ST SL Tax Code = STC Tax Code = STC Tax Code = WT 3 Calculate Tax on Taxable income 2 Calculate Student Loan Deduction End April 2018 to 31 March 2019 Final

75 There is an option to have tax and/or student loan repayments deducted at a flat rate. Student loan deductions will take into consideration the repayment threshold the flat rate will be on income above the repayment threshold. The special tax code/special deduction rate certificate (IR 23) shows a figure to deduct PAYE at the rate of XX cents per dollar. (XX =>rate on certificate) This amount includes earner s levy of 1.39%. Note: The special tax code/deduction rate can only be used if the certificate covers the period (or parts of the period) 01/04/2018 to 31/03/2019 or longer. Special tax rates, including for schedular payments (tax code WT), can be an amount from zero to 100 cents per dollar. Where the person also has a student loan the certificate will provide the deduction rate to deduct student loan deductions. This will be anything from 0% 12%. Where the employment is the main employment, the rate will apply to income above the pay period repayment threshold, e.g. $374 per week. Where the income is from secondary employment the threshold will not apply April 2018 to 31 March 2019 Final

76 6.9.1 Schedular Payment Provisions Student loan deductions, KiwiSaver deductions and contributions and the ACC Earners Levy do not apply to schedular payments (tax code WT). With the changes that became effective 1 April 2017, most contractors are able to elect their own WT tax rate (no lower than 10%), which means they won t need to apply for a STC. However, there may be scenarios where the WT rate needs to be lower than 10% so a STC certificate will still be necessary. Special Tax Code calculations Sequence Task Associated Rules 1 Calculate employee s pay amount for pay period. 2 Truncate pay period amount to whole dollars, eg $ becomes $ Calculate total amounts to be deducted. Multiply pay period amount by rate on the certificate. 4 Truncate amount to whole cents. Special Tax Code including Student Loan calculation Sequence Task Associated Rules 1 Calculate employee s taxable income for the pay period. 2 Truncate pay period amount to whole dollars, $ becomes $ Calculate student loan deduction. Truncate amount to whole cents. 4 Calculate PAYE amount to be deducted. Truncate amount to whole cents. Multiply pay period amount by rate on the certificate. The certificate will advise whether the rate is applied to every dollar, or only every dollar above the repayment threshold e.g. $374 per week. Multiply pay period amount by the PAYE rate on IR April 2018 to 31 March 2019 Final

77 6.9.2 Special Deduction Rate (SDR) and Special Tax Codes (STC) A borrower may have a special deduction rate (SDR) applied to their salary or wage income. This can be used where the borrower is in hardship, or where they have more than one job and earn under the pay period repayment threshold in their main job. A SDR is any standard deduction rate less than 12 cents in every dollar. No SDR can be greater than 12 cents in every dollar. A borrower wanting deductions of more than 12 cents in every dollar should be using SLBOR see above. The SDR cannot be applied retrospectively. Borrowers will be provided with a Special Deduction Rate certificate which they provide to their employer. The certificate will continue to advise which tax code/sl repayment code (e.g. S SL) the employer should use, the rate at which the SL deductions are to be made, and the period that the SDR should apply to. The SDR will be a whole percentage only (e.g. 3% or 3 cents in the dollar), calculated to two decimal places (e.g. $0.03). The Special Deduction Rate Certificate may or may not require the pay period threshold to be used. For some tax codes the correct treatment can be inferrede.g. "M SL" and "S SL" codes provide sufficient information as to whether or not the threshold is to be used. If the employee s special tax code certificate expires and employer has not received either a replacement special tax code certificate or a new IR330/330C the employee tax rate would revert to the tax code specified on the previous IR330/IR330C provided to the employer. Where the employee has not previously provided an IR330/IR330C, then the employee would be placed on the No Notification tax rate until such time as an IR330/IR330C or special tax code certificate is provided April 2018 to 31 March 2019 Final

78 Special deduction rate and SLCIR If an SDR is granted to a borrower, the Commissioner will cancel any SLCIRs that a borrower may have, regardless of employer. Special Deduction Rate and SLBOR If a borrower currently has an SDR rate of 8 cents in every dollar for their secondary employment and also has additional deductions using the SLBOR repayment code of a set amount of $20.00 a week, the borrower would have standard deductions using a SL repayment code (e.g. S SL) at the rate of 8 cents in every dollar, and in addition has an extra $20 deducted for student loan using the SL repayment code SLBOR. Borrowers can continue to apply for an STC in respect of income tax. Where the borrower is entitled to reduced income tax and SL deductions, a Special Tax Code Certificate will be issued. The certificate will continue to advise employers to use the STC tax code, the rate at which income tax should be deducted, the rate for SL deductions, and the period that the certificate should apply to. The following examples show what happens when a borrower has an STC or SDR. Example One The borrower has been granted an STC due to hardship, and has reduced SL and tax rates for the full year. The STC is valid from 1 April 2018 to 31 March 2019, with tax at a flat 20% rate and SL deductions at 8 cents in every dollar. The STC certificate will state: that the applicable period is the whole year (1 April 2018 to 31 March 2019) that the STC tax code must be used that the amount of tax will be calculated at 20% of earnings that SL deductions will be calculated at 8 cents in every dollar, but note: o if this is the borrower s main income SL deductions will be 8 cents in every dollar above the repayment threshold, which is 8 cents in every dollar of earnings in excess of $374 per week. o if this is their secondary employment, then SL deductions will be 8 cents of every dollar. o the certificate will state which of these scenarios applies April 2018 to 31 March 2019 Final

79 Example Two A borrower applies for an SDR for their secondary employment, because they have an unused repayment threshold from their main employment. They do not currently have a reduced rate for tax. The SDR certificate will state: that the SDR period is from 1 July 2018 to 30 September 2018 that the tax code is S SL (or appropriate secondary employment SL) tax code that SL deductions will be at the rate of 8 cents in every dollar (must be for every dollar of earnings as this is secondary income). In addition, the SDR certificate will state: that from 1 October 2018 to 31 March 2019 the tax code will be S_SL (or other secondary employment SL code) that SL deductions will be at the rate of 12 cents in every dollar of earnings (must be for every dollar as this is secondary income). Example Three A borrower has an SDR in place for their second job, applicable from 1 July 2018 to 30 September They then apply for a reduced tax rate for that job. The original Special Deduction Rate certificate (see example two above) will be replaced with a Special Tax Code certificate. In this example the Special Tax Code certificate applies from 2 August The STC certificate would state - for the period 2 August 2018 to 30 September 2018: o the tax code will be STC o tax will be calculated at the rate of 18 cents in every dollar of earnings o SL deductions will be at the rate of 8 cents in every dollar (as this is secondary employment it will be 8 cents of every dollar earned, and the certificate will make this clear). for the period 1 October March 2019: o the tax code will be STC o tax will be calculated at rate of 18 cents of every dollar o SL deductions will be at the standard rate of 12 cents of every dollar (as this is secondary employment it will be 12 cents of every dollar earned, and the certificate will make this clear) April 2018 to 31 March 2019 Final

80 Example: Special Deduction Rate (certificate) Student loan special deduction rate certificate Inland Revenue PO Box Lower Hutt 5010 Date of issue: 15 March 2018 Telephone IRD Number Certificate number DLN number This certificate is valid from 1 April 2018 to 31 March Dear: ABC Employer For your employee James Smith, IRD number , you are authorised to: From 1 April 2018 to 30 June 2018 use tax code SSL make student loan deductions at the special deduction rate of 8 cents in each dollar of gross income. From 1 July 2018 to 31 March 2019 use tax code SSL make student loan deductions at the standard deduction rate from each dollar of gross income. This replaces any other student loan special deduction rate or repayment deduction exemption certificate we have issued previously for the same period for the above employee. Your employee must give you a new certificate when this one expires. If they don t, you ll need to make student loan deductions at the standard deduction rate from each dollar of gross income. Please keep this certificate with your employee's wage records. For more information on the standard deduction rate go to (keywords: student loan glossary) Yours sincerely Name Title Please note - it is an offence to alter this certificate April 2018 to 31 March 2019 Final

81 6.9.3 Repayment deduction exemption All borrowers must use a SL repayment code (unless exempt). A borrower who is a full time student, earning above the pay period repayment threshold, but below the annual repayment threshold, may be eligible to be exempt from SL repayment deductions. This means they do not also use the SL repayment code in combination with their tax code. The exemption cannot be applied retrospectively. If the borrower is exempt, Inland Revenue will provide the borrower with an exemption certificate, which they provide to their employer(s). The certificate will advise that they are not required to have SL deductions, which tax code (e.g. M instead of MSL) they should use, and the period for which the exemption will apply. The certificate will also provide instructions as to which tax code should be applied when the exemption ceases e.g. MSL. Refer: Employer s guide IR335 - page April 2018 to 31 March 2019 Final

82 6.10 Employee Share Schemes (ESS) Effective 1 April 2017 employers are able to tax benefits of an employee share scheme as an extra pay. It is not compulsory to do so, and employers can choose to withhold PAYE on an employee by employee basis, and on a benefit by benefit basis for each employee. From 1 April 2018 the taxable value of the benefit is to be shown as a separate record on the EMS whether or not PAYE has been withheld, with the following information; Employee IRD Number Employee Name Employee tax code (i.e. ESS) Gross earnings and/or schedular payments (i.e. the taxable value of the ESS benefit) Earnings and/or schedular payments not liable for ACC Earners Levy (i.e. the taxable value of the ESS benefit). PAYE/Tax Student Loan deductions Child support deductions ESS benefits are to be shown on the EMS except in the following circumstances; employee or an associate of the employee sells share rights to a nonassociated third party; or share benefit arises from an exempt employee share scheme; or share benefits are provided to a former employee. The value of an ESS benefit is included as income for the purposes of: Student loan deductions, Child support payments, and Working for Families tax credits However, ESS benefits are not liable for: KiwiSaver deductions or employer contributions the ACC Earners Levy The value of the ESS benefit is determined on the date the employee acquires the shares. To allow twice monthly filers sufficient time to calculate the value of the ESS benefits they have more time to declare and pay tax, if any, on an ESS benefit April 2018 to 31 March 2019 Final

83 These employers can advise and pay the tax on the ESS benefit in the pay-period immediately following the purchase of the shares or the exercise of an option (i.e. the next IR345). The extension of the timeframe relates only to the ESS benefit and any associated PAYE, student loan and child support deductions related to it. However any normal pay the employee receives will still be due by the standard due date. Example 1 Employee Share Scheme ESS (employer deducts PAYE) The employee has a tax code of M SL and receives a fortnightly salary of $1, They contribute to KiwiSaver at 3% and have an ESCT rate of 17.5%. The ESS benefit (extra pay) is $2,500, and the gross earnings for the last four weeks were 3,500 The last four weeks income $3,500 x 13 = annual income $45,500 The total earnings $45,500 + extra pay $2,500 amounts to $48,000 The tax rate applied to the extra pay is 17.5% 17.5% * $2,500 = $ The extra pay is not liable for ACC Earners Levy. Completing the EMS for Normal Pay: Employee Tax Code M SL Gross earnings and/or schedular $3, payments Earnings and / or schedular payments not $0.00 liable for ACC Earners Levy Lump sum (extra pay) indicator 0 PAYE / tax $ Student loan deductions $ KiwiSaver deductions $ Net KiwiSaver employer contributions $86.63 Completing the EMS for ESS: Employee Tax Code ESS Gross earnings and/or schedular $2, payments Earnings and / or schedular payments not $2, liable for ACC Earners Levy Lump sum (extra pay) indicator 0 PAYE / tax $ April 2018 to 31 March 2019 Final

84 Student loan deductions $ KiwiSaver deductions $0.00 Net KiwiSaver employer contributions $0.00 Example 2 Employee Share Scheme (ESS) (employer doesn t deduct PAYE) The employee has a tax code of M SL and receives a fortnightly salary of $1, They contribute to KiwiSaver at 3% and have an ESCT rate of 17.5%. The ESS benefit (extra pay) is $2,500, but the employer has chosen not to deduct PAYE so no calculation is necessary for PAYE or Student Loan. Completing the EMS for Normal Pay: Employee Tax Code M SL Gross earnings and/or schedular $3, payments Earnings and / or schedular payments not $0.00 liable for ACC Earners Levy Lump sum (extra pay) indicator 0 PAYE / tax $ Student loan deductions $ KiwiSaver deductions $ Net KiwiSaver employer contributions $86.63 Completing the EMS for ESS: Employee Tax Code ESS Gross earnings and/or schedular $2, payments Earnings and / or schedular payments not $2, liable for ACC Earners Levy Lump sum (extra pay) indicator 0 PAYE / tax $0.00 Student loan deductions $0.00 KiwiSaver deductions $0.00 Net KiwiSaver employer contributions $ April 2018 to 31 March 2019 Final

85 6.11 Extra pay (Lump Sum) - Primary income 2 Note: The extra pay payment calculation applies to the rates codes EDW, CAE and ND. PAYE and Student Loan calculations 2 For flat rate calculations for EDW, CAE and ND, refer to section April 2018 to 31 March 2019 Final

86 Extra pay (Lump Sum) PAYE calculations Primary Income Sequence Task Associated Rules 1 Determine Tax code 2 Calculate Student Loan deduction. Tax code = M SL, ME SL, or STC 2.1 Calculate pay for pay period, including normal pay and extra pay Include lump sum payments which are paid as annual or special bonuses, retiring or redundancy payments, gratuities or back pay. Exclude non-taxable amounts. This amount (normal pay plus extra pay) is referred to as pay for the pay period below. 2.2 Truncate pay for the pay period (ie before Student loan deduction) amount to whole dollars, $ becomes $ Calculate student loan deductions. No special deduction rate certificate. If the pay for the pay period is less than student loan pay period repayment threshold, then the deduction is $0.00. If the pay for the pay period is more than the student loan pay period repayment threshold the calculation is : pay for the pay period minus the SL repayment threshold x 12%. If the borrower is on an STC the threshold may or may not apply - this will be clarified on the certificate. If a borrower has provided a special deduction rate certificate. If the pay for the pay period is less than student loan pay period repayment threshold, then the deduction is $0.00. If the pay for the pay period is more than student loan pay period repayment threshold the calculation is : pay for the pay period minus the SL repayment threshold x SDR rate. NB If the extra pay amount is not paid at the same time as the normal pay and the pay for the pay period cannot be calculated then multiply the entire extra pay amount by the appropriate student loan deduction rate. Eg 12% or SDR rate April 2018 to 31 March 2019 Final

87 Sequence Task Associated Rules Special Tax Code (STC) If a bonus is paid to an employee who has an STC, deduct tax at the rate shown on the certificate. For retiring or redundancy payments deduct tax at the STC rate (excluding ACC Earners Levy). The payment should be marked as Earnings not liable for ACC Earners Levy on the EMS files to avoid the ACC Earners Levy being forwarded to ACC. 2.4 Truncate amount to whole cents e.g. $ becomes $ Calculate PAYE 3.1 Calculate four-weekly gross-up then add extra pay amount For example, an STC rate of 24% would be deducted at 22.61% (24%-1.39%) for retiring or redundancy payments. If tax is calculated using an STC rate, sequence ends at this step. Identify the value of the PAYE income payments made in the four weeks prior to, and inclusive of the day on which the extra pay is paid. If in the four weeks prior, the employee was paid: - Four one-weekly pays total of the four pays and multiply by 13 - Two fortnightly pays total of the two pays and multiply by 13 - One four-weekly pays - multiply the amount by 13 - One monthly pay - multiply the amount by 12 In other circumstances, add all PAYE income payments made to the employee in the four weeks prior and multiply by 13. Add the amount of the extra pay to get the grossed up amount. Example Pay period weekly at $1,000 per week with an extra pay of $500 included with the latest pay In the past four weeks (inclusive of this pay) the employee has had four weekly pays totalling $4,000 (exclude this extra pay $500). Multiply this by 13 X $4,000 = $52,000 Then add the extra pay $500 The Grossed up amount = $52,500 Note: When a payment is made outside the normal pay cycle, the 4-week period ends on the day the payment is made April 2018 to 31 March 2019 Final

88 Sequence Task Associated Rules 3.2 Drop cents from the annualised income (truncate to whole dollars), e.g. $14, becomes $14, Determine Tax rate 3.4 If the employee has elected to have extra pays deducted at a higher rate, the tax rate is either 17.5%, 30% or 33%, whichever they have elected. 3.5 If the grossed amount is greater than $70, If the grossed amount is greater than $48,000 but less or equal to $70, If the grossed amount is greater than $14,000 but less than or equal to $48, If the grossed amount is less than or equal to $14,000. Tax rate is 33%. Tax rate is 30%. Note: They can elect to deduct at 33%. Tax rate is 17.5%. Note: They can elect to deduct at 33% or 30%. Tax rate is 10.5% Note: They can elect to deduct at 33%, 30% or 17.5%. 3.9 If tax rate was 10.5%. Record a flag showing extra pay deducted at the lowest rate. This would require a tick on the printed EMS and a 1 on the electronic file Calculate tax amounts to be deducted Multiply the extra pay amount by the tax rate determined. 4 Calculate ACC Earners Levy. 4.1 If the extra pay is redundancy, retirement allowance or Employee Share Scheme benefit. 4.2 If the grossed up amount plus extra pay does not exceed $126,286 From step above will be 10.5%, 17.5%, 30% or 33%. Do not round this figure. ACC Earners Levy is $0.00. ACC Earners Levy is the extra pay multiplied by 1.39%. 4.3 If the grossed up amount does not exceed $126,286, and the grossed up amount plus extra pay exceeds $126, If the grossed up amount exceeds $126,286 5 Calculate total tax to be deducted. 5.1 Add ACC Earners Levy and tax deducted. 5.2 Truncate amount to whole cents. ACC Earners Levy is $126,286 minus the grossed up amount, multiplied by 1.39%. Please refer to example 1 below. Do not round this figure. ACC Earners Levy on the extra pay is $0.00. Please refer to example 2 below. Do not round this figure April 2018 to 31 March 2019 Final

89 Example 1 If a bonus payment is $15, and the gross earnings for the last four weeks were $9,000 - The last four weeks income $9,000 x 13 = annual income $117,000. The total earnings $117,000 + bonus $15, amounts to $132, The maximum ACC Earners Levy threshold is $126,286 $132, $126,286 = $5, Therefore earnings in excess of ACC Earners Levy threshold are $5, The bonus payment means the total is in excess of ACC Earners Levy threshold, therefore: ACC Earners Levy on the lump sum is to be calculated as follows - ($126, ,000) x 1.39% = ($15, amount in excess $5,714.56) * 1.39% = $ In this example the tax to be deducted from the lump sum would be at 33% since the grossed up annual income exceeds $70,000 giving $4, (15, lump sum amount)*33% applicable rate) + ACC Earners Levy $ = $5, Note: Cents are not removed from bonus payment and final figure will not be rounded. Example 2 If a bonus payment is $15,000 and the gross earnings for the last four weeks were $15,000 - The last four weeks income $15,000 x 13 = annual income $195,000. The total earnings $195,000 + bonus $15,000 amounts to $210,000. The maximum ACC Earners Levy threshold is $126,286. $210,000 - $126,286 = $83,714 Therefore earnings in excess of ACC Earners Levy threshold are $83,714. The grossed up income is in excess of the ACC Earners Levy threshold, so the bonus payment is not liable for ACC Earners Levy In this example the tax to be deducted from the lump sum would be at 33% since the grossed up annual income exceeds $70,000 giving $4,950 (15, lump sum amount)*33% applicable rate)+ ACC Earners Levy $0 = $4, April 2018 to 31 March 2019 Final

90 Note: Following moved to ESS section and updated. Example 3 Employee Share Scheme ESS (employer deducts PAYE) The employee has a tax code of M SL and receives a fortnightly salary of $1, They contribute to KiwiSaver at 3% and have an ESCT rate of 17.5%. The ESS benefit (extra pay) is $2,500, and the gross earnings for the last four weeks were 3,500 The last four weeks income $3,500 x 13 = annual income $45,500 The total earnings $45,500 + extra pay $2,500 amounts to $48,000 The tax rate applied to the extra pay is 17.5% 17.5% * $2,500 = $ The extra pay is not liable for ACC Earners Levy. Completing the EMS: PAYE on $3,500 $ KSE on $3,500 $ Net KSR on $3,500 $86.80 ESCT $18.20 SLS on $3,500 $ SLS on $2,500 $ Tax on extra pay $ Gross $6,000 ($3,500 + $2,500) PAYE $1, ($ $585.76) SLE $ ($ $300.00) KSE $ Net amount paid to employee $4, KSR $86.80 ESCT $ April 2018 to 31 March 2019 Final

91 Example 4 Employee Share Scheme (ESS) (employer doesn t deduct PAYE) The employee has a tax code of M SL and receives a fortnightly salary of $1, They contribute to KiwiSaver at 3% and have an ESCT rate of 17.5%. The ESS benefit (extra pay) is $2,500, but the employer has chosen not to deduct PAYE so no calculation is necessary. Completing the EMS: Gross $6,000 PAYE $ SLE $ KSE $ Net amount paid to employee $5, KSR $86.80 ESCT $ April 2018 to 31 March 2019 Final

92 Example 3 Extra pay is paid outside the standard pay period The employee has a tax code of M SL and receives a fortnightly salary of $1, They received a one-off bonus of $1,000 on 5 September. They receive a redundancy payment of $7,500 with their normal pay on 5 October. The calculation would look like this: Fortnightly gross wages $1,128 Four-weekly gross wages $2,256 Multiplied by 13 $29,328 Plus the bonus payment $7,500 Annualised income plus extra pay $36,828 Tax rate to be applied to the extra pay 17.5% The student loan deduction would be calculated as follows: Fortnightly gross income $1,128 Plus extra pay $7,500 Total payment for the fortnight $8,628 Minus weekly pay period threshold $748 Total $7,880 Student loan deductions (12% of $7,880) $ However in another scenario, the employee asks that the redundancy payment be made as soon as possible. The employer agrees to this and pays the extra pay on 28 September. In this case the calculation would look like this: Fortnightly gross wages $1,128 Four-weekly gross including $1,000 bonus $3,256 Multiplied by 13 $42,328 Plus the bonus payment $7,500 Annualised income plus extra pay $49,828 Tax rate to be applied to the extra pay 30% As the extra pay is not associated with a regular pay period, no regular student loan repayment threshold applies, and student loan deductions are calculated at 12% of the extra pay. Extra pay $7,500 Student loan deductions (12% of $10,000) $ April 2018 to 31 March 2019 Final

93 6.12 Extra pay (Lump Sum) - Secondary Income PAYE and student loan calculation Student loan code (S SL, SB SL, SH SL, ST SL or STC) 1 Determine Tax code? No student loan tax code 2 Calculate Student Loan deduction 3 Calculate PAYE 4 Calculate Earners Levy 5 Calculate total tax to be deducted End April 2018 to 31 March 2019 Final

94 Sequence Task Associated Rules 1 Determine tax code 2 Calculate Student Loan deduction. Tax code = S SL, SB SL, SH SL, & ST SL 2.1 Calculate pay for pay period. Include lump sum payments which are paid as annual or special bonuses, retiring or redundancy payments, gratuities or back pay. Exclude nontaxable amounts. This amount is referred to as pay for the pay period below. 2.2 Truncate pay period amount to whole dollars, $ becomes $ Calculate student loan deductions. No special deduction rate certificate. Multiply pay for the pay period amount by 12%. If a borrower has provided a special deduction rate certificate. Multiply pay for the pay period amount by the percentage provided on the certificate Special Tax Code (STC) If a bonus is paid to an employee who has a STC, deduct tax at the rate shown on the certificate. For retiring or redundancy payments deduct tax at the STC rate (excluding ACC Earners Levy). The payment should be marked as Earnings not liable for ACC Earners Levy on the EMS files to avoid the ACC Earners Levy being forwarded to ACC. For example, an STC rate of 24% would be deducted at 22.61% (24%-1.39%) for retiring or redundancy payments. 2.4 Truncate amount to whole cents, e.g. $ becomes $ If tax is calculated using an STC rate, sequence ends at this step. 3 Calculate PAYE April 2018 to 31 March 2019 Final

95 Sequence Task Associated Rules 3.1 Calculate four-weekly gross-up then add extra pay amount. Identify the number of salary or wage payments made in the four weeks prior to, and inclusive of the day on which the extra pay is paid. If in the four weeks prior, the employee was paid: - Four one-weekly pays total of the four pays and multiply by 13 - Two fortnightly pays total of the two pays and multiply by 13 - One four-weekly pays - multiply the amount by 13 - One monthly pay - multiply the amount by 12 In other circumstances, add all PAYE income payments made to the employee in the four weeks prior and multiply by 13. Add the amount of the extra pay to get the grossed up amount. Add low threshold amount for employee s secondary tax code to give grossed amount. 3.2 Drop cents from the annualised income (truncate to whole dollars), e.g. $14, becomes $14, Determine Tax rate. 3.4 If the employee has elected to have extra pays deducted at a higher rate, the tax rate is either 17.5%, 30% or 33%, whichever they have elected. 3.5 If the grossed amount is greater than $70, If the grossed amount is greater than $48,000 but less than or equal to $70, If the grossed amount is greater than $14,000 but less than or equal to $48, If the grossed amount is less than equal to $14,000. Tax rate is 33%. Tax rate is 30%. Note: They can elect to deduct at 33%. Tax rate is 17.5%. Note: They can elect to deduct at 33% or 30%. Tax rate is 10.5% Note: They can elect to deduct at 33%, 30% or 17.5% April 2018 to 31 March 2019 Final

96 Sequence Task Associated Rules 3.9 If tax rate was 10.5%. Record a flag showing extra pay deducted at the low rate. This would require a tick on the printed EMS and a 1 on the electronic file Calculate tax amounts to be deducted Multiply the extra pay amount by the tax rate determined. From step above will be 10.5%, 17.5%, 30% or 33%. Do not round this figure. 4 Calculate Earners Levy. 4.1 If the extra pay is redundancy, retirement allowance or Employee Share Scheme benefit. 4.2 If the grossed up amount exceeds $126,286. ACC Earners Levy is $0.00. The maximum ACC Earners Levy is $ ACC Earners Levy on the extra pay is $ If the grossed up amount does not exceed $126,286. ACC Earners Levy is 1.39% multiplied by the extra pay. Do not round this figure. 5 Calculate total tax to be deducted. 5.1 Add ACC Earners Levy and tax deducted. Do not round this figure. 5.2 Truncate amount to whole cents. Example A tax payer using the SH tax code receives a bonus payment of $1000 and the gross earnings for the last four weeks were $500. The last four weeks income ($500 x 13) + the bonus $1000 = annual income from secondary source $7,500. The minimum income threshold for the SH tax code is $48,001. Add the annual income from the secondary source $7,500 + income threshold for SH tax code $48,001 = $55,501. The correct tax rate for the bonus would be 30% since the grossed up income is greater than $48,000 and less than $70,000. ACC Earners Levy would be calculated as the bonus $1000 * April 2018 to 31 March 2019 Final

97 6.13 Lump sum payment taxed at the lowest rate If the lowest rate of tax was used in the calculation of the tax on an extra pay amount, the employer will need to enter a tick in the lump sum payment taxed at low rate circle on the paper schedule, enter a 1 on the electronic schedule or tick the checkbox on the electronic onscreen form Regular bonuses A regular bonus is any bonus paid frequently throughout the year, such as: monetary incentives production bonuses Bonuses paid at same time as regular pay Regular bonuses are treated as being part of the salary or wages for the employee for the relevant pay period. Add the regular bonus to the salary/wages for the pay period, then calculate PAYE as usual according to the employee s tax code. Monthly bonuses covering more than one pay period 1. Add up the gross wages paid for a month s income, eg if you pay weekly, add the four weekly payments together. 2. Work out the PAYE on the gross wages for the month 3. Add the bonus to the gross wages calculated at step 1 and work out the PAYE for the month on the total. 4. Subtract the PAYE calculated at step 2 from that calculated at step 3. This gives you the PAYE on the bonus. Bonuses covering more than one month 1. Divide the bonus by the number of months it covers. This gives you the monthly bonus amount. 2. Add the monthly bonus to the normal pay for the month and calculate PAYE. Select monthly in the PAYE calculator. 3. Calculate the PAYE on the normal monthly pay and subtract this amount from the PAYE calculated at step 2 above. This gives you the PAYE on the monthly bonus. 4. Multiply this by the number of months the bonus covers to get the total PAYE to be deducted from the bonus April 2018 to 31 March 2019 Final

98 6.15 Schedular Payments From 1 April 2017 the rules relating to schedular payments were changed as part of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Bill. The changes include: Contractors (including companies) hired by labour-hire firms under a labourhire arrangement have been added as a scheduler payment type. Most contractors are able to elect their own withholding rate, though there are exceptions to this, relating to Non-Resident contractors, Non-resident entertainers, and professional sports people. This is done on an IR330c Tax rate notification for contractors form (follow the link for details of this form: This form specifies that their tax code is WT, and what their elected deduction rate is, which can be between 10 and 100%. If the contractor provides their name and IRD number but does not or cannot elect a rate, use the table below to determine the standard rate to use, unless they provide a special tax code certificate or a certificate of exemption on schedular payments (follow the link for details of this certificate: A schedular payment type for persons wanting to voluntarily have tax deducted from their contractor income has been added. Voluntary schedular payments have a standard rate of 20 cents per dollar of the payment. The Commissioner is also able to notify the payer of a specific tax rate to be deducted from payments made to a contractor. The no-notification rate as applicable for WT has been standardised at 45 cents per dollar of the payment April 2018 to 31 March 2019 Final

99 Rates of tax for schedular payments Activity Standard rate Nonotification rate ACC personal service rehabilitation payments (attendant care, home help, childcare, attendant care services related to training for independence and attendant care services related to transport for independence) paid under the Injury Prevention and Rehabilitation Compensation Act Agricultural contracts for maintenance, development, or other work on farming or agricultural land Agricultural, horticultural, and viticulture contracts by companies and other contractors, including supply of labour for pruning and/or thinning of fruit trees or vines, and picking and/or packing of fruit or grapes Cleaning office, business, institution, or other premises (except residential) or cleaning or laundering plant, vehicles, furniture, etc Commissions to insurance agents and sub-agents and salespeople Company directors fees Contracts wholly or substantially for labour only in the building industry Demonstrating goods or appliances Entertainers (New Zealand resident only) such as lecturers, presenters, participants in sporting events, and radio, television, stage and film performers Examiners (fees payable) Forestry or bush work of all kinds, planting, sowing or gathering vegetables, or flax planting or cutting Freelance contributing to newspapers, journals, etc. (articles, photographs, cartoons, etc.) or for radio, television or stage productions Gardening, grass or hedge cutting, or weed or vermin destruction (for an office, business or institution) Honoraria (including payments to Mayors, chairmen and members of council, boards of trustees, boards, committees and official clubs or societies, etc.) Jockeys or drivers apprentices Modelling Non-resident contractors who are not companies 1 : construction work, installation, assembly and similar projects professional or technical services for such projects hire of equipment or personnel(other than as employees) Non-resident contractors who are a company Non-resident entertainers and professional sports people visiting New 0.20 N/A Zealand 2 Payments made to contractors under a labour-hire arrangement, includes payments to individuals and companies April 2018 to 31 March 2019 Final

100 Activity Standard rate Nonotification rate Payments for: mail contracting transport of school children milk delivery refuse removal, street or road cleaning Caretaking or acting as a watchman Proceeds from sales of : eels, greenstone, whitebait, Sphagnum moss (not retail sales) wild deer, pigs, or goats or parts of these animals Public office holders (fees) Share fishing (on contract for the supply of labour only) Shearing or droving Television, video or film; on-set and off-set production processes (New Zealand residents only) Voluntary schedular payments Other contractors who are not required to have any form of PAYE deductions can, with the agreement of the payer, opt to have payments made to them treated as a schedular payment. 1 Non-resident contractors cannot elect below 15% Non-resident entertainers and professional sports people visiting New Zealand cannot elect their own rate 3 Contractors engaged by labour-hire firms cannot apply for a Certificate of Exemption for income earned under any labour-hire arrangement April 2018 to 31 March 2019 Final

101 Tax deducted from Schedular payments Employer Monthly Schedule The tax code should show as WT and earnings not liable for Earners Levy as the Gross schedular payment. Schedular payments should not include or be included in earnings as an employee. If paying both normal earnings as an employee and schedular payments you must record one line on the EMS as an employee with normal tax code and one line for the schedular payment with WT code. GST If the payee is GST-registered, exclude deducted GST from the payment before calculating tax on schedular payments. Only the GST exclusive amount has tax on schedular payments deducted. For example, a payment of $115 (GST inclusive) is due to the payee; exclude the GST component of $15. Deduct the tax on schedular payments (e.g. 20%) from the remaining $100 to calculate the net amount excluding GST. The amount on the EMS will show Gross $100, tax on schedular payments of $20.00, earnings not liable for EL of $100 and a tax code of WT. Add the amount of GST back to the net amount to calculate the net payment to the payee (e.g., $80 net amount plus $15 GST = $95). The amount of GST is not included on the EMS. If a declaration has been filled out with all details Tax = ( Standard or Elected Rate ) * (Earnings) Else Tax = (No Not. Rate) * (Earnings) In both cases truncate the tax amount to whole dollars and cents April 2018 to 31 March 2019 Final

102 6.16 Child Support Employer Deduction Notice CS 503 Inland Revenue Child Support can send you a notice telling you to deduct, amend or stop child support payments from your employee s next pay. The notice shows: Your employee s name and IRD number. The payday or pay period that you must start, amend or stop child support deductions. The amount to deduct from each pay. Employee reference number (if you have provided one). If this is the first time you are making deductions, don t make any deductions before the start date on the notice April 2018 to 31 March 2019 Final

103 Protected net earnings All employees must be allowed to keep 60% of their net pay, after tax and child support and any other attachment order is deducted. This is the employee s protected net earnings, to cover living expenses. Note that student loan repayment obligations are not considered a tax when calculating protected net earnings. Protected net earnings only apply to child support payments (and other attachment orders as described in the following section). You must still make other deductions, such as student loan repayments, KiwiSaver or ACC Earners Levy. However, insurance, superannuation and union fees may be deducted subject to the Wages Protection Act Child support and any other attachment order deductions cannot exceed 40% of the net pay. 1 Calculate Net Pay 2. Calculate Protected Net Earning 3. Calculate Maximum Child Support 4. Calculate Child Support Deduction Amount 5. Calculate other Attachment Order Deduction Amount Note: Employee Share Scheme benefits are not considered to be a source deduction payment for the purposes of this calculation. Do not include ESS amounts in Gross Earnings or PAYE below. Sequence Task Associated Rules 1` Calculate Net Pay. Net Pay = 2 Calculate Protected Net Earnings. Gross Earnings - PAYE (excluding Earners Levy). Protected Net Earnings = Net Pay * 60% 3 Calculate Maximum Child Support Deduction. Maximum Child Support Deduction = Net Pay - Protected Net Earnings April 2018 to 31 March 2019 Final

104 4 Calculate Child Support Deduction Amount. 5. Calculate other Attachment Order Deduction Amount If Child Support Amount > Maximum Then Else If Child Support Deduction Deduct Maximum Child Support Deduction (On EMS IR 348 enter variation code P) Maximum Deduction = 0 Deduct Child Support Amount as per deduction notice Maximum Deduction = Maximum Deduction - Child Support Amount as per deduction notice. Attachment Order Deduction Amount > Maximum Deduction Then Else Deduct Attachment Order Deduction Amount (On EMS IR 348 enter variation code P) Maximum Deduction = 0 Deduct Attachment Order Deduction Amount Maximum Deduction = Maximum Deduction - Attachment Order Deduction Amount Calculating Protected net earnings on other Attachment Orders Where an employee has one or more District Court attachment orders other than child support, Section 157 of the District Court Act 2016 provides legislation allowing deduction restrictions in addition to those provided by the Income Tax Act and the Tax Administration Act. Section 157 (3) of the District Court Act states that where an attachment order is working alone or in conjunction with one of a number of possible notices (child support, tax arrears, parentage test costs, social security debts), the protected net earnings rule applies in all situations upon these attachment orders; whether included with a child support notice or not. (Please note, Inland Revenue arrears orders are based on gross earnings). In these situations, the protected net earnings rate is the higher of: 60% of the post-tax earnings for the period, or the minimum level of income specified in the notice, as provided by Section 156 (d) of the District Court Act For example, an employee who earns $2,000 a week has protected net earnings of the higher of $1,514, or any level set by the District Court April 2018 to 31 March 2019 Final

105 In situations where the employee has one or more attachment orders in addition to a child support notice, the child support payment should always be deducted ahead of any other attachment orders. The following order of rank should apply: 1. Child support 2. Other attachment orders 3. ACC levy 4. Student loan repayments 5. Kiwisaver employee contribution 6. Other voluntary deductions Note: ACC levy is excluded when calculating protected net earnings on attachment orders Payroll Giving Payroll Giving grants employees an immediate tax credit for their donation(s) to a donee organisation (listed on Inland Revenue s Donee List) where the donation is made using their employer s Payroll Giving scheme. The tax credits for payroll donations are used to reduce the amount of PAYE paid by the employee. Payroll Giving is voluntary for both employers and employees. Tax credits for payroll donations are reported via an electronic Employer Monthly Schedule (the EMS in myir) and an electronic payment form (the EDF in myir). Payroll Giving is only available to employees of employers who file their schedule and payment form electronically. The same calculation is used to calculate tax credits for payroll donations for all tax codes and all annual incomes equally: Tax Credit for Payroll Donation = Total Donation x The amount is truncated to whole cents i.e. calculate to 2 decimal places, do not round up or down. Before making a donation, individuals must have met all tax obligations and any payments legally required to be deducted from their pay. These include: PAYE (tax and ACC Earners Levy) Student Loan Child Support KiwiSaver The Maximum tax credit for payroll donations is limited to the Tax element of PAYE i.e., PAYE minus ACC Earners Levy equals Tax. Timeframe for Passing Donations April 2018 to 31 March 2019 Final

106 Donations are deducted from employee s salary or wages by the employer and passed directly to the chosen donee organisation. Donations need to be passed to the donee organisation on or before the due date for your EDF/IR 345, whichever is closest to the end of the two months from the last day of the pay period that the donation was deducted Keeping Sufficient Records Employers and PAYE intermediaries must keep sufficient records of the amount of any payroll donation deducted from an employee s pay to enable Inland Revenue to determine that payroll donations have been transferred to the correct recipient. For additional information on payroll giving please refer to the link below: Inland Revenue arrears payments An employer may receive a notice from us requiring them to deduct tax, student loan arrears or family tax credit over payments from an employee s wage (a section 157 notice). The notice will explain how to calculate the required amounts. Child support payments must be deducted before tax and student loan arrears and Working for Family Tax Credit over-payments. Note: This is a different situation from the student loan process for significant under-deductions, where the employer would be instructed to use the student loan SLCIR repayment code. Note: the notice received refers to weekly pay periods. If the employee is not paid weekly, you need to multiply the deduction amount to suit the pay period. The payments need to be sent to IR by the end of each calendar month, completely separate from PAYE payments. They should not appear on the EMS or EDF. If the payment is to be made electronically, please specify the employee s IRD number, tax type, period and amount. If it isn t made electronically, the details should be supplied on a separate piece of paper April 2018 to 31 March 2019 Final

107 Employee has Inland Revenue arrears to pay (Section 157 notice) Yes Is the gross pay <$100 per week No Deduct the lesser of 10% of the sum in default as per notice or 20% of gross pay. Yes Deduct $10 (per week) Note: In certain circumstances, deduction notices for fixed amounts different from the lesser of the 10% of the sum in default as per notice or 20% of gross pay, may be issued. Non-Filing Information This section contains information for Payroll developers not directly related to filing information via myir April 2018 to 31 March 2019 Final

108 6.19 Initiating electronic payments using payroll software packages If your package is able to initiate electronic payments to us then you need to ensure that the correct payment reference details are supplied for your client. If the details are incorrect, delays in processing these payments can occur. There are two different tax type codes that relate to employer deducted payments. If the payment includes a combination of the following, you can use the employer deductions (DED) code: PAYE Child Support deductions Student Loan repayment deductions Employer superannuation contribution tax KiwiSaver deductions for employees Net KiwiSaver employer contributions If the payment is being made for PAYE intermediary purposes, the intermediary employer deductions code (IED) must be used Electronic payment format requirements Employers (including PAYE intermediaries) will need to provide their bank with the following payment information: Payee name: Inland Revenue Amount: total amount of the payment Our bank account details: Particulars: Employer s or PAYE intermediary s IRD number Payee code: DED or IED (see above). Leave the next box blank, then enter the period end date for the payment being processed i.e. (DDMMCCYY) Reference: This can be used for your own personal reference. NOTE: These fields (IRD number, Tax Type code and Period End Date) are necessary in order for us to allocate the payment received correctly. Some software packages may already populate specific non Inland Revenue information (e.g. an accounting reference) in either the particulars or payee code field, and changing this is very difficult. Should this be the case, then you need to ensure that the IR payment reference details are displayed in any remaining fields to minimise impacts for your clients and how their payments are processed April 2018 to 31 March 2019 Final

109 Particulars field This field simply represents the Employer or PAYE intermediary s IRD number. We have now introduced nine digit IRD numbers. If the IRD number is eight digits long then a preceding zero must be shown in the field. The IRD number must start from the left and the remaining three boxes left blank. Payee code field Enter the tax type code (DED or IED). Leave the next box blank, then enter the period end date the payment is for not the date the payment is being made Reference field This field is for your own personal reference. Example of a standard employer deductions (DED) electronic payment Example of a PAYE Intermediary (IED) electronic payment April 2018 to 31 March 2019 Final