Understanding Your Tax Compliance Obligations as an Employer
Navigating the intricacies of tax compliance is a fundamental responsibility for employers. Ensuring that you meet all your tax obligations not only keeps your business on the right side of the law but also fosters trust and transparency with your employees. This article provides a comprehensive guide to understanding your tax compliance obligations as an employer, tailored to the local market.
Registering as an Employer
Inland Revenue Registration
The first step in fulfilling your tax obligations is registering as an employer with Inland Revenue. This process involves obtaining an employer number and setting up a system to manage payroll and tax deductions. Registration can be completed online through the Inland Revenue website. Once registered, you will be responsible for several key tax obligations, including PAYE (Pay As You Earn), KiwiSaver contributions, and other deductions.
PAYE and Other Deductions
PAYE (Pay As You Earn)
As an employer, you are required to deduct PAYE from your employees’ wages or salaries. PAYE includes income tax and ACC (Accident Compensation Corporation) levies. The amount of PAYE to be deducted depends on the employee’s earnings and tax code. Inland Revenue provides detailed guidelines and calculators to help you determine the correct PAYE deductions.
KiwiSaver Contributions
KiwiSaver is a voluntary, work-based savings initiative designed to help employees save for retirement. If your employees are KiwiSaver members, you are required to make employer contributions in addition to deducting employee contributions from their wages. The standard employer contribution rate is 3% of the employee’s gross salary or wages. Employees can choose to contribute 3%, 4%, 6%, 8%, or 10% of their gross earnings.
Student Loan Repayments
If your employees have student loans, you must make deductions from their wages to repay the loans. The standard deduction rate is 12% of the employee’s earnings above the repayment threshold. Ensure you are aware of any specific repayment plans or conditions that may apply to your employees.
Child Support Payments
In some cases, you may be required to deduct child support payments from your employees’ wages. Inland Revenue will notify you if this is necessary and provide details on the amount to be deducted. These payments must be remitted to Inland Revenue along with other deductions.
Goods and Services Tax (GST)
Registering for GST
If your business’s turnover exceeds $60,000 in a 12-month period, you must register for GST. GST is a 15% tax added to the price of most goods and services. Registration can be completed online through Inland Revenue’s myIR service. Once registered, you will need to charge GST on your sales, file regular GST returns, and pay any GST owed to Inland Revenue.
Filing GST Returns
GST returns are typically filed either monthly, two-monthly, or six-monthly, depending on your business’s turnover and filing preference. You must report the GST collected on sales and the GST paid on business expenses. The difference between these amounts is either paid to Inland Revenue or claimed as a refund. Accurate record-keeping is essential to ensure your GST returns are correct.
Fringe Benefit Tax (FBT)
Understanding FBT
Fringe Benefit Tax (FBT) is a tax on benefits provided to employees in addition to their salary or wages. Common fringe benefits include company cars, low-interest loans, and free or discounted goods and services. As an employer, you are responsible for calculating and paying FBT on these benefits.
Filing FBT Returns
FBT returns are usually filed quarterly, although annual filing is an option for some employers. You must calculate the taxable value of the benefits provided and apply the appropriate FBT rate. Inland Revenue provides detailed guides and calculators to assist with FBT calculations.
Record-Keeping and Reporting
Maintaining Accurate Records
Accurate record-keeping is crucial for tax compliance. You must keep detailed records of all wages paid, tax deductions, and benefits provided. These records should be retained for at least seven years and be readily available for inspection by Inland Revenue if required.
Payday Filing
As of April 2019, employers are required to file employment information every payday. This includes details of employees’ earnings and deductions. Payday filing can be done electronically through payroll software or manually through Inland Revenue’s online services. This system ensures that tax information is up-to-date and reduces the risk of errors.
Staying Updated with Tax Legislation
Monitoring Changes
Tax laws and regulations are subject to change, and it is essential to stay informed about any updates that may affect your obligations. Regularly review Inland Revenue’s website and subscribe to updates to stay current with the latest tax developments. Consulting with tax professionals or accountants can also help you navigate complex changes and ensure compliance.
Seeking Professional Advice
Managing tax compliance can be complex, and seeking professional advice can provide valuable support. Tax advisors, accountants, and payroll specialists can help you understand your obligations, optimise your tax processes, and ensure accuracy in your filings. Firms like BDO, KPMG, and EY offer comprehensive tax compliance services tailored to the local market.
Understanding and fulfilling your tax compliance obligations as an employer is critical for legal compliance and maintaining a positive relationship with your employees. By registering with Inland Revenue, accurately deducting and remitting taxes, keeping detailed records, and staying informed about legislative changes, you can ensure your business meets its tax responsibilities. Whether you manage tax compliance in-house or seek professional assistance, taking the time to understand your obligations will benefit your business and contribute to a transparent and fair tax system.