New ZealandTax Obligations Detailed

As of February 5, 2025, employers in New Zealand have several tax obligations, including PAYE, ESCT, FBT, ACC, and KiwiSaver.

PAYE (Pay As You Earn)

Employers deduct income tax from employees' salaries and wages based on progressive tax rates. The current rates for the 2024-2025 tax year (applicable until March 31, 2025) are:

• 10.5% for income between $0 to $15,600
• 17.5% for income between $15,601 to $53,500
• 30% for income between $53,501 to $78,100
• 33% for income between $78,101 to $180,000
• 39% for income above $180,000

From April 1, 2025, new tax rates and income thresholds will apply. Payment due dates for PAYE depend on the employer's size, with large employers making semi-monthly payments and small to medium employers making monthly payments. February 2025 deadlines for small to medium employers is the 19th.

ESCT (Employer Superannuation Contribution Tax)

Employers pay ESCT on contributions made to employees' KiwiSaver or other approved superannuation schemes. ESCT rates (until March 31, 2025) are:

• 10.5% on earnings between $0 to $16,800
• 17.5% on earnings between $16,801 to $57,600
• 30% on earnings between $57,601 to $84,000
• 33% on earnings between $84,001 to $216,000
• 39% on earnings above $216,001

FBT (Fringe Benefit Tax)

FBT is payable on non-cash benefits provided to employees. The single rate is 63.93%, or employers can use alternate rate methods. FBT returns are typically filed quarterly, but annual filing is possible for some employers. FBT is due on February 6, 2025.

ACC (Accident Compensation Corporation) Levies

Employers pay ACC levies to cover employees for work-related injuries. The levy rate varies depending on industry risk.

KiwiSaver

Employers must enroll eligible employees in KiwiSaver and contribute a minimum of 3% of the employee's gross salary, with the employee also contributing a minimum of 3%. Employees can choose higher contribution rates.

Additional employer obligations include deducting student loan repayments and child support payments from employees' salaries when required. It's important to stay updated on tax rates, thresholds, and deadlines as these are subject to change by the government. This information is current as of February 5, 2025.

In New Zealand, employers are responsible for deducting several taxes and contributions from employee salaries, including Pay As You Earn (PAYE) income tax, ACC Earners' Levy, KiwiSaver, Student Loan repayments, and Child Support.

PAYE Income Tax

PAYE is the primary tax deducted from employee wages and salaries. The amount deducted is based on the employee's earnings and their tax code. Tax codes consider an employee's filing status, income level, and any applicable entitlements to tax credits. Employers use PAYE deduction tables or calculators provided by Inland Revenue or integrated payroll software to determine the correct deduction amount. The tax rates for the 2024-2025 tax year (1 April 2024 to 31 March 2025) are as follows:

• $0 – $14,000: 10.50%
• $14,001 – $15,600: 12.82% (composite rate due to tax cuts effective 31 July 2024)
• $15,601 – $48,000: 17.50%
• $48,001 – $53,500: 21.64% (composite rate)
• $53,501 – $70,000: 30.00%
• $70,001 – $78,100: 30.99% (composite rate)
• $78,101 – $180,000: 33.00%
• $180,001 upwards: 39.00%

The proposed FBT (Fringe Benefit Tax) rate for the 2025-2026 tax year are expected to be:

• $0-$13,962: 11.73%
• $13,963 - $45,230: 21.21%
• $45,231 - $62,450: 42.86%
• $62,451 - $130,723: 49.25%
• $130,724+: 63.93%

Note: These FBT rates are proposed and might change.

ACC Earners' Levy

The ACC Earners' Levy funds New Zealand's Accident Compensation Corporation, which provides no-fault injury cover for all residents and visitors. The levy is calculated as a percentage of the employee's earnings up to a maximum amount. For the 2024-2025 tax year, the levy rate is applied to earnings up to $142,283, with a maximum levy payable of $2,276.52.

KiwiSaver

KiwiSaver is a voluntary work-based savings scheme for retirement. Employees can choose to contribute a percentage of their gross salary (3%, 4%, 6%, 8%, or 10%), and employers are required to contribute at least 3% of the employee's gross salary. These contributions are deducted directly from the employee's pay.

Student Loan Repayments

Employees who have a student loan are subject to compulsory repayments deducted from their salary. The repayment rate is based on their income level and is calculated as a percentage of their earnings above a certain threshold.

Child Support

Employers may also be required to deduct child support payments from employees' wages. The amount deducted is stipulated by the Inland Revenue based on court orders or agreements. A 'protected net earnings' threshold limits child support deductions to a maximum of 40% of an employee's net pay in certain circumstances, such as reduced pay due to unpaid leave. However, other deductions (PAYE, KiwiSaver, Student Loan) are still made even if the total exceeds 40%.

Additional Information

• Employers are responsible for accurate deductions and timely remittance to Inland Revenue, usually through payday filing.
• Employees provide their tax code (IR330) and, if contractors, their tax rate notification (IR330C). Employers must retain these forms for seven years.
• Inland Revenue publishes updated PAYE deduction tables annually. It's crucial to use the correct tables for the relevant pay period. These can be accessed on the Inland Revenue website (ird.govt.nz).
• Software and online calculators are available to assist with PAYE calculations.

In New Zealand, Goods and Services Tax (GST) is a value-added tax applied to most goods and services.

GST Rates and Taxable Supplies

• Standard Rate: 15% (applied to most goods and services)
• Reduced Rate: 9% (applies to long-term hotel accommodation exceeding four weeks)
• Zero Rate: 0% (applies to exports, financial services, land transactions between GST-registered parties under specific conditions, and international transportation)
• Exempt Supplies: Financial services (except those zero-rated), precious metals, donations, and residential rent.

GST Registration

• Threshold: Businesses must register for GST if their turnover exceeds NZ$60,000 in a 12-month period or if they expect to exceed this threshold in the next 12 months.
• Voluntary Registration: Businesses with turnover below NZ$60,000 can register voluntarily to recover input GST.
• Non-resident Businesses: The same registration rules apply. They are required to register if supplying remote services (digital products, software, etc.) or low-value imported goods (LVIGs, under NZ$1000) where sales to New Zealand consumers exceed NZ$60,000 in any 12-month period. Non-residents are not required to have a fiscal representative.
• Group GST Registration: Not permitted for non-resident businesses.

GST Filing and Payment

• Filing Frequency:

  • Monthly: Turnover exceeding NZ$24 million in a 12-month period.
  • Bi-monthly: Turnover between NZ$500,000 and NZ$24 million in a 12-month period.
  • Six-monthly: Turnover below NZ$500,000 in a 12-month period.

• Deadlines: GST returns and payments are generally due by the 28th day of the month following the end of the taxable period. Exceptions:

  • Taxable period ending November 30th: Due date is January 15th of the following year.

• If the due date falls on a weekend or public holiday, the next working day becomes the due date.

Invoicing Requirements

Tax invoices must include:

• The words "tax invoice"
• Supplier's trading name and GST number
• Invoice issue date
• Description of goods and services supplied
• Amounts in New Zealand Dollars (NZ$)

Imports and GST

• GST is payable on most imported goods and services, including low-value imported goods.
• Customs generally collects GST (and any applicable duties) on goods exceeding NZ$1000 in value. Alcohol and tobacco are exceptions.
• For goods valued at NZ$1,000 or less, overseas suppliers may be required to register, collect, and remit GST if their annual sales to New Zealand consumers exceed NZ$60,000.

Additional Considerations

• A 3% Digital Services Tax (DST) might be implemented in 2025 for large multinational companies, but the implementation date is not yet definite. Please refer to the latest official resources for any updates regarding the DST.
• Reverse Charge Mechanism: Applies to B2B transactions where the recipient of the goods/services is responsible for accounting for the GST.
• Record Keeping: Businesses must retain relevant documentation, including invoices (sales and purchase), bank statements, and records of daily takings.

This information is current as of February 5, 2025, and might be subject to change. Always refer to official sources from the Inland Revenue Department (IRD) for the most up-to-date and comprehensive information.

New Zealand offers several tax incentives for businesses and individuals.

Individual Tax Incentives

• Independent Earner Tax Credit (IETC): Provides tax relief for individuals earning between NZD 24,000 and NZD 70,000 annually. The credit is up to NZD 520 per week, with a reduction for income above NZD 66,000. Eligibility requires meeting specific residency and income criteria. Note: Updated income thresholds are NZD 15,600-NZD 78,100 as of July 31, 2024.
• Working for Families Tax Credits: Offers support to low- and middle-income families with dependent children. The credit is paid in installments, with annual adjustments. Amounts received are non-taxable. Family scheme income determines eligibility and credit amounts.
• Tax Credits for Donations: Individuals can claim a tax credit of 33.33 cents for every dollar donated to approved charities. Donations must be to an organization on the IRD's approved donee list to be eligible for the tax credit.
• Credits for Taxes Withheld: Cover several tax types, including PAYE (Pay As You Earn), provisional tax installments, Resident Withholding Tax (RWT) on dividends and interest, and Withholding Tax deductions from contractor payments.

Business/Corporate Tax Incentives

• Research and Development (R&D) Tax Incentive: Encourages R&D investment by offering a 15% tax credit on eligible expenditures up to NZD 120 million annually. The credit can offset a company's income tax liability and may be refundable under specific conditions. A minimum R&D expenditure of NZD 50,000 is required annually to be eligible. Additional incentives exist for loss-making R&D companies, offering rebates related to payroll tax.
• Foreign Tax Credits: Available to resident companies with overseas income subject to New Zealand tax. The credit amount is capped at either the foreign tax paid or the New Zealand tax applicable to that income, whichever is less. These credits are not applicable to non-resident shareholders.

Application Procedures

Details on the specific application process for each incentive, along with required documentation, can be found on the Inland Revenue's website.

Additional notes: As of Budget 2024 (effective July 31, 2024), personal income tax thresholds have been adjusted. This information is current as of February 5, 2025, and may be subject to change with future updates in tax legislation. It's essential to consult with a tax professional or refer to official sources like the Inland Revenue website for the most up-to-date information.