From 1 April 2018, New Zealand employers paying more than $50,000 PAYE and Employer Superannuation Contribution Tax (ESCT) per year have the option to switch to an electronic payday reporting system, before it becomes compulsory on 1 April 2019. While a year may seem a long time to prepare, it pays to do your homework early to avoid hassles with Inland Revenue later on.
If you’re involved with your organisation’s payroll, chances are you’ve already heard about the changes coming to New Zealand’s payroll reporting system.
What is payday reporting?
Employers currently file employee earnings and PAYE information to Inland Revenue each month, no matter how frequently they pay their employees. Under payday reporting, this information will be reported to the IRD every time your employees are paid.
This brings New Zealand in line with the UK and Australia and streamlines the whole reporting process, making any mistakes easier to spot and correct online as soon as they’re made and allows government social policy to be based on more real time information. Paper IR 330 and KiwiSaver deduction forms for new employees will go online as well, making it easier for employers to enter the correct information when an employee starts.
Payday reporting relates only to the need to report the earnings and PAYE information each pay to Inland Revenue. There is no change to the dates on which tax payments are due. These remain the same, either once or twice a month depending on whether your business is withholding less or greater than $500,000 per year. Employers may choose to make payments on a more frequent basis, but this remains optional.
How can you get ready?
If you’re an employer, you will need to ensure your software system, or that of your payroll provider, is compatible with payday reporting by 1 April 2019. We suggest you talk to your payroll provider about the changes and how they are planning to be ready.
Now is a good time to review how well your current payroll system is working for you, and if your needs have changed. Is your system built using a modern cloud infrastructure, capable of adapting to the upcoming changes quickly without messy updates?
It’s also a good time to look at whether you need to make changes to your payroll procedures, similar to when KiwiSaver was introduced. Getting the right procedures in place can take time, so it’s good to have some time up your sleeve.
What is Datacom doing to get ready?
We’ve been working collaboratively with other payroll software companies and the IRD to define and understand all the requirements for payday reporting. To minimise any risks to our customers we have chosen not to implement optional payday reporting at 1 April 2018. We’re testing all our processes carefully and will manage a controlled and staggered migration to the new reporting processes, to ensure any issues that arise are identified and fixed before it’s compulsory to make the switch.
The new reporting framework will be seamlessly integrated into Datacom’s existing payroll software to avoid any disruption to our customers. Our system will be in line with payday reporting well before 1 April 2019 when the new process becomes mandatory.
How will this affect me?
If you are a Datacom payroll customer, we already handle the Employer Monthly Schedule (EMS) filing requirements for most of you, which means that we’re already filing your PAYE information automatically each month without you having to do a thing.
Payday reporting will be handled in much the same way, which means you should notice very little difference (if any) come April 2019. Datacom will simply report this information for you on a real-time payday basis instead of once a month. If you’ve been filing your EMS manually each month, we recommend you consider filing electronically instead before payday reporting comes into effect.