Payroll updates for NZ New Tax Year 2021-2022
April is fast approaching, and so is New Zealand New Tax Year! This time of year is important for all kinds of businesses, but let’s be honest - nobody loves extra administration tasks.
To make things easy for you, the team at KeyPay has compiled a list of payroll related changes that should be useful for preparing for the New Tax Year. We’re also working on some cool enhancements in the product to make Tax Year End processing as simple as possible in the lead up to 2021 / 2022.
Rate updates & legislation changes for NZ Tax Year 2021/22
ACC Earners Levy
On July 6 2020 the Government announced that it’s maintaining current levy rates for the next 2 years to ease financial pressures of COVID-19. Therefore the Earners’ Account Average levy rate per $100 of liable earnings (incl. GST) remains at $1.39.
The maximum liable earnings that self-employed and businesses pay Work Account Levies on are to remain as outlined below as stated by the IRD:
The minimum liable earnings that self-employed people pay Work and Earners' levies on
remains at $36,816 in 2021/22.
Tax threshold and rate change
The IRD has proposed a new tax threshold / rate of 39% for income over $180,000. There are some amendments due to this change which would impact payroll including:
- A new secondary tax code
- New rate for extra pays
- A new ESCT rate
- New rate and threshold for FBT calculations
KeyPay is making NZ New Tax Year a piece of cake
As always, we’re automating processes to make Tax Year End admin much less frustrating.
Tax scale updates
On April 1 2021, tax scales will be updated automatically in KeyPay. When a pay run is created with a pay date of April 1 onwards, KeyPay will apply new tax rates automatically. No need to download tax tables or perform any manual calculations!
ESCT (Employer Superannuation Contribution Tax) rates
ESCT is the tax deducted from employer contributions to employees’ Kiwisaver or superannuation account. Before the start of the new tax year, employee ESCT rates must be reviewed and updated as required. KeyPay users can apply a bulk update of rates using the ESCT Rate Report.
With KeyPay, users can generate this report for the new Tax Year, and based on pay rates, intended salaries for the year can propose whether employee rates need to change for the new Tax Year. Users can just pick who they want to update and it updates. We’ll be updating this report in time for the new Financial Year.
Issuing earning certificates
An earnings certificate is a summary of an employee's earnings, tax and deductions over the tax year. Earnings certificates can be issued to employees:
- at the end of each tax year; or
- at the end of an employee's employment.
Employers are not legally obligated to issue earnings certificates to employees. Rather, it is at the discretion of the employer.
This functionality was rolled out by KeyPay last Year End, but the KeyPay team is proposing enhancements to this for Tax Year End 2021 including notifications to let employees know earning certificates are available, and making them available through the WorkZone app.
Payday filing upgrade
The IRD is changing its reporting with new reporting requirements, taking effect from April 1. Version 2 provides more Employment Information and Employee Detail information than the current version 1. Find out more detail on these changes here.
All employers will need to be reporting by Payday filing version 2 by April 1. KeyPay will be launching ‘version 2’ of Payday filing in time for the start date.
NZ End of Year payroll processing guide
Our helpful article will guide you through the process of wrapping up the 2020/2021 Financial Year, generating and notifying your employees' Earning Certificates, and getting ready for the New Tax Year,
Make payroll easier in 2021
Not using KeyPay yet? KeyPay is a cloud-based payroll and workforce management platform designed by payroll professionals, for payroll professionals. Servicing over 200k businesses and processing over $30bn payments globally each year, KeyPay is a fully automated payroll solution, offering unparalleled time-saving benefits, transparent, Holidays Act compliant leave calculations, and a suite of workforce management tools and apps built-in.
Sign up for a free trial and give it a try yourself for New Tax Year!