Our thoughts on Payday filing

By now you should be aware of the new payday filing rules which came into force on the 1st of April 2019. Previously, employers could file details of employee earnings and attend to the payment of PAYE with the IRD monthly, or twice monthly for larger employers (regardless of the pay period). Payroll information is now required to be filed with the IRD more frequently, however the payment of PAYE is unchanged – for the majority of farmers this is still the 20th of the month following the relevant period.

The key reason for the change was to improve accuracy and timeliness of information being sent to the IRD. In some cases, it could take up to 50 days after a payday for the IRD to receive information before processing it.

Tax codes, Student Loan Deductions, Child Support Payments and Working for Families Tax Credits rely on this information and by receiving this information more timely the IRD can act faster to make changes. This should result in fewer errors and mitigate any end of year wash-up.

What does this mean for farmers?

Depending on your chosen method, you may face higher compliance costs or more time in your office.

If you are an employer and pay wages or contractors and deduct withholding tax you should now be using one of three methods for filing your payroll information with the IRD.

  1. You subscribe to a cloud based payroll software package.

Although software comes at a cost, payroll becomes an automated process and significantly reduces workload in the office.

There are many software options out there, including Smart Payroll and PaySauce (Who are both promoted by Cashmanager Rural).

PaySauce currently has a promotion for Federated Farmers Members, offering a $50 credit on sign-up. To find out more about this promotion click here.

  1. You manually enter payroll information into the myIR portal on the IRD website.

Farmers under this system will have to use this portal and submit details of all wages and schedular payments (i.e. contractors with withholding tax deducted) paid within two days of every pay date.

If you use this method you will have to tally up the PAYE amounts calculated from each return throughout the month as IRD still only want the one payment of tax on the 20th of the month following.

  1. You return your payroll information twice monthly using a paper return.

Many farmers will still be using paper returns and don’t necessarily need to change, but the frequency of returns will. Paper filing must be done twice monthly and received by the IRD within 10 days of the 15th and the end of each month. This method involves manual calculations of PAYE and requires employers to keep track of the total PAYE amounts for payment on the 20th of the month following, as you would with the myIR method.

If you are using myIR or paper returns, our suggestion is to consider your pay frequency. This may not be practical for payments to employees or casuals, but if you’re an owner-operator, then pay yourself once per month. This can be beneficial as you only have to fill out one return for the month and can setup the PAYE payment at the same time, significantly reducing your office time when compared to someone who pays themselves weekly. If you operate a company and take drawings and declare an annual shareholder salary then your drawings frequency is irrelevant.

If you need assistance with payday filing and your payroll requirements, then come and see us for a chat about how we can help.