Payday reporting is just around the corner
Tax Alert - February 2019
By Emma Faulknor and Susan Wynne
It is not long until payday reporting will apply to most employers and intermediaries when the rules become compulsory from 1 April 2019. To help with the transition, employers and intermediaries have had the opportunity to apply the new rules prior to 1 April 2019. We have set out a few common questions that have arisen as the compulsory application of these new rules approaches.
A quick recap
Employers and intermediaries will be required to digitally file employment information, instead of the current employer monthly schedule, within two working days of payday. This will impact most employers, including those with shadow payrolls or who make schedular payments.
Employers who withheld less than $50,000 of PAYE and ESCT in the previous year can choose to submit their payroll information on paper within ten working days of payday. Paper filers can also choose to adopt deemed paydates of the 15th and end of the month for simplicity and file within 10 working days of these dates.
Employers will also have to provide additional information to Inland Revenue about new and departing employees
before the next payday.
Practically, employers and intermediaries will be able to file via their MyIR login direct from compatible software, through onscreen data entry or file upload from compatible software.
There is no change to the due dates for PAYE or other deductions payable to Inland Revenue.
What is a working day?
With reporting to Inland Revenue due within two working days of payday it is important to understand what is a working
day. The income tax legislation defines the meaning of a working day and the key points to note are:
- A working day is Monday to Friday.
- The days between 25 December and 15 January are excluded from the definition of working days for tax purposes. Payroll reporting information for a payday that falls within that period will instead be due on 17 January at the earliest (assuming 16 and 17 January are working days).
- While New Zealand’s national public holidays (Good Friday, Easter Monday, Queen’s Birthday, Anzac day, Waitangi
day and Labour day) are not working days for tax purposes, regional holidays (Anniversary days) are working days and must be included when determining when the payday reporting information falls dues.
In a recent training session with Inland Revenue they advised that there was no time cut-off for a working day. Employers will have until midnight that working day to file online.
On a related note, a payday means the day an employer makes a PAYE income payment to an employee. If this is via a bank transfer the payday is the date the employer instructs the bank to make the funds available.
Can information be filed in advance of payday?
It will be possible to file payroll information in advance of payday, provided payroll information has been completed. This may be necessary around big holiday periods, such as the recent summer break many enjoyed, or when payroll staff will be away. If any errors do occur, it will be possible to amend the filed returns.
What if a return is nil?
There is no requirement to file payday information when it will be a nil return, nor does the electronic payday reporting system allow nil returns to be filed. Inland Revenue has provided assurance that their software will be able to distinguish
between an unfiled return and a return that hasn’t been filed because it’s a nil return. Irregular filers will also be recognised and recorded as such in the Inland Revenue system. As a result of the systems in place to analyse filing patterns Inland Revenue expects to be able to determine when late filing penalties should be imposed.
Keeping track of how much to pay Inland Revenue?
There is no change to the current due dates for PAYE and other deductions payable to Inland Revenue. Despite employers filing payday information much earlier Inland Revenue is recommending that employers continue to pay as they currently do. The total payable at the usual due date will need to be tracked so that payment can be made to Inland Revenue as it may no longer match to one employer monthly schedule. If payroll software is used the software may display the total due, however Inland Revenue has noted that they are working on making the total payable visible in MyIR.
When can you register?
You can register now via Inland Revenue’s MyIR system. However, once registered you’re in and you’ll have to comply with all the payday reporting requirements and won’t be able to go back to the old system, whether or not 1 April 2019 has passed.
Payday filing starts at the beginning of the following month after you’ve opted in, unless it’s after 1 April 2019 when it becomes compulsory. For employers who will only be adopting payday reporting from 1 April 2019, it is worth considering registering from 1 March 2019 to provide time to familiarise yourself with the new system. Registering in March will only make payday reporting applicable from the compulsory start date of 1 April 2019.
Once registered, only the owner of the MyIR account will have access to the payday filing functions so it will be necessary for that person to delegate access to users. This is similar to the process that arose when GST filing switched to MyIR.
After registering for payday filing the final IR348 and IR345 returns, for the previous month, will need to be filed using payroll returns in MyIR.
Are you ready?
The move to payday reporting raises a number of important requirements, such as:
- Reviewing all payroll function requirements to check current processes will support the increased frequency of reporting that will be required.
- Engaging with your payroll software provider to determine their development roadmap and timeline for release of enabled software.
- Identifying your MyIR account owner and making sure they are prepared to review and relink MyIR payroll function delegations/access/authorisations upon opting into or on registration for payday filing.
In addition to checking your payroll software or provider is up to scratch, employers should be comfortable that
they are getting it right too. Our article from October 2018 provides some guidance to employers and intermediaries.
Inland Revenue has also published useful information to help ensure that payroll systems are payday reporting ready and this is available on the Inland Revenue website.
The key point is to be prepared before the payday reporting requirements are compulsory. The changes can seem arduous but the intention behind them long term is to make processing easier and less time consuming for employers. We certainly hope to see the benefits sooner rather than later. For further guidance on payday reporting and other tax issues please contact your Deloitte tax advisor.