ACC Earner Levy changes
The PAYE tax is actually made up of two components – the main being tax, the other being a portion of the ACC Earner Levy that funds the ACC scheme. After increasing steadily for a few years, the Earner Levy is dropping for 2012/13 from 2.04% to 1.7%. While not a massive decrease, it does mean lower PAYE overall for your employees, which will be appreciated.
You don’t need to do anything to manage this change. Your payroll software will manage this automatically once you install MYOB Payroll 2012.
KiwiSaver seems to be a scheme that is constantly tinkered with and 2012/2013 is no exception. This year introduces a significant change to the way that employer contributions are taxed.
Employers’ contributions to KiwiSaver have always been subject to a tax known as ESCT (Employer Superannuation Contribution Tax). Up until now, any contribution made by an employer to an employee’s KiwiSaver was exempt from tax up to 2%, and anything over 2% was taxed. Because 2% was the compulsory employer contribution, most employees would not have seen these contributions taxed at all.
However, for 2012/2013, the full employer contribution is taxed. You can see this by viewing the ‘Super’ button in the Enter Pays screen. This shows what the Employer Contribution is and what has been deducted.
This change means that employees will see a decrease in the Net Employer Contribution figure on their payslips and you – as an employer – might need to explain the difference to employees. It might be helpful to add an explanation to your payslips if you anticipate confusion.
Because all employer super contributions are taxed, it is now important to use the correct ESCT rate. MYOB Payroll will make this easier by introducing a new ‘Calculated’ option for the ESCT rate. This option will apply the relevant IRD rules to select the ESCT rate based on employee earnings. From 1 April 2012, all existing and new employees will default to this option. You still have the option of overriding the ESCT rate if you choose, but you will need to follow the IRD rules for ESCT.
ESCT rate calculation
The ESCT rate needs to be set based on the sum of an employee’s annual gross earnings, plus annual gross employer contributions. If the employee has already been employed for a full tax year, the calculation should be based off the last year’s actual earnings, plus last year’s gross employer contributions.
If the employee is new, or was not employed for the full prior tax year, then the rate needs to be estimated based on the annual gross earnings and gross employer contributions.
|ESCT rate threshold amount||Tax rate (%)|
Student Loan changes
The 2012/2013 financial year also sees the introduction of changes to the student loan regime. All borrowers are now required to use a student loan (SL) tax code, regardless of their earnings threshold. Therefore, some employees may need to present you with a new declaration and you can simply change their tax code in the Maintain Employees screen.
New Student Loan deduction codes
The IRD has also introduced new student loan deduction tax codes for additional student loan deductions. SLCIR is for compulsory deductions required by the IRD, and SLBOR is for voluntary additional deductions made by the employee. These are set up in the Employees Deduction tab. It is important to use these codes so that the information is correctly reported to the IRD on the Employer Monthly Schedule, which allows the IRD to accurately reconcile these deductions to the employee’s student loan balance.