IRD - Crystal Payroll

Important Updates to Legislation, IRD and Crystal Payroll

Crystal Payroll — Sun, 10 Mar 2024 01:55:07 +0000

As we approach the 2024 tax year, significant changes will come into effect. These include three legislative alterations to employment laws coming April 1st and an important IRD update impacting payroll for those using the self-service option. At Crystal Payroll, we’re always updated and prepared for these changes. We’ve also got some great system updates to share to keep you informed on how we’re constantly improving.

Legislation Changes

Minimum Wage Increase

A key change coming April 1st is the minimum wage increase from $22.70 to $23.15 per hour. Consequently, the training and starting-out wage will rise to $18.52 from the current minimum rate of $18.16 per hour, remaining at 80% of the adult minimum wage.

To put the increase into perspective, an employee working 40 hours per week at the old rate earned $47,216 before tax annually, whereas at the new rate, they will earn $48,152. This translates to an extra $936 annually or about $18 more per week for an employee working 40 hours at minimum wage.

Due to this upcoming minimum wage increase, employers will need to adjust the wages for employees currently earning below the new minimum wage of $23.15 per hour. To facilitate this transition, Crystal Payroll will automatically update the wage rates for all employees currently on or between the current and new minimum wages. This means anyone earning from $22.70 to $23.14 per hour will be adjusted to the new rate of $23.15 per hour. However, if you prefer to manage this wage adjustment manually, please let us know by emailing our support team at support@crystalpayroll.co.nz.

It’s important to note that the training wage will not be adjusted to reflect this increase in the minimum wage.

ACC Earners’ Levy

Secondly, Employees will see a slight increase in their levy deductions. The ACC earners’ levy rate has been increased to 1.60% from the previous rate of 1.53%, an increase of 0.07%. For those earning up to the maximum liable earnings limit, the increase will be proportional to their income. The maximum liable earnings limit for this levy will be $142,283. For individuals earning more than NZ$142,283 annually, their levy contribution will be capped at a maximum amount of NZ$2,276.52.

Student Loan Repayment Threshold

Thirdly, the threshold for student loan repayments will be raised to NZ$24,128 for the financial year 2024, up from NZ$22,828. This change means that individuals earning below this new threshold will not be required to make student loan repayments.

The IRD states that for the 2024 tax year that “The amount you have to pay to your student loan each year is 12% of every dollar you earn over the repayment threshold.” The annual repayment threshold increase means that all frequency rates have changed too.

The repayment threshold is now broken down into the following pay period thresholds:

$464 if you’re paid weekly.
$928 if you’re paid fortnightly.
$1,856 if you’re paid every 4 weeks.
$2,010 if you’re paid monthly.

Individuals with student loans who earn below the new threshold will benefit as they won’t have to make repayments until their earnings exceed this limit. This can provide some financial relief, particularly to those starting their careers or working part-time.

Want to know how long it will take to pay back your student loan? Have a look here.

What do you need to do?

Crystal Payroll is set to seamlessly integrate all the recent and forthcoming changes to New Zealand’s payroll system as soon as they take effect. There’s no need for you to take any action, as Crystal will automatically update the ACC earners’ levy within the PAYE calculations, apply the student loan deductions to employees’ pay as required, and implement the new minimum wage rate starting from April 1st, 2024. Rest assured, these updates will be handled efficiently, ensuring compliance with the latest payroll regulations without any additional effort on your part.

IRD changes

As part of our commitment to keeping you informed and ahead of the curve, we need to share an important update from the Inland Revenue Department (IRD) that will affect the way we manage payroll filings together.

Our development team has been in close discussions with the IRD, advocating for a smooth transition into the new tax year. Despite our efforts to delay some changes that could introduce challenges, the IRD has decided to proceed with these updates.

Starting this tax year, all our Self Service clients will need to take an important step: authenticating your MyIR accounts with Crystal Payroll. This change arises because PAYE intermediaries, like us, will no longer be able to file on your behalf without direct linkage or authentication. This might sound a bit technical, but don’t worry – we’re here to guide you through every step.

To make this process as seamless as possible, we’re introducing a new reminder feature. Whenever it’s time to set up authentication, you’ll see a prompt to ensure you’re all set. It’s a simple step, but one that’s essential. Without this authentication, we won’t be able to file returns for you, which could lead to late filing notifications or penalties from the IRD.

As always, our team is on hand to assist with any questions or concerns you might have about setting up your MyIR authentication with Crystal Payroll.

System Updates

Exciting news! We’ve added a feature a lot of you have been asking for. It’s a small change with a big impact on personalization. Say hello to Personalized Payslips! Now you can upload your company logo in General Settings, giving your payslips that custom, professional look.

Our development team is always hard at work to enhance Crystal Payroll, ensuring it remains the best choice for your payroll needs. Here’s a snapshot of even more of the new features we’ve rolled out already this year:

General Enhancements

Department-Specific Leave Allocation: Now, you can assign any leave type to particular departments or branches.

Enhanced Reporting: Leave accruals are now visible in the Payroll Variance report.

Improved Timesheet Note Size: We’ve increased the note size for employee timesheet input, making it easier to record and read your notes.

Updated Help Index: Find new updates in our guides on managing public holidays and annual leave.

Streamlined General Ledger Analysis: Access this report directly from the “Take Home Pay” section, and seamlessly integrate with “Send to Xero.”

Cash-Up Overtime in Lieu: Utilize the “Cash-Up Entitlement” function for this purpose.

Multi-Employee Regular Allowances/Deductions: Apply these to several employees simultaneously.

Expanded Leave Tracking: Leave without pay is now included in the “Leave Taken History” report.

Automated Timesheet Notifications: Crystal Timesheets now automatically alert managers via email.

Selective Leave Approval: Assign leave approval permissions to designated managers.

API/Integration Updates

Empower Time & Attendance: We have created a seamless API integration so you can easily pull your timesheet hours in Crystal Payroll.

KIM Time & Attendance: now features a seamless API integration.

JP Morgan GDFF Banking Integration: Enjoy streamlined banking processes for JP Morgan with this new integration.

Remember, our Crystal Payroll support team is always here to assist you with any questions or guidance you might need regarding the new changes. Your peace of mind is our priority.

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The post Important Updates to Legislation, IRD and Crystal Payroll appeared first on Crystal Payroll.

Decoding Tax Codes: A Payroll Guide for Employers and Employees

Crystal Payroll — Wed, 18 Oct 2023 01:59:07 +0000

Introduction

What Are Tax Codes and Why Are They Important?

Different Tax Codes in New Zealand and Who They Apply To

- Main Tax Codes
- Secondary Tax Codes
- Other Tax Code
- Student Loan Code
- Tailored Tax Code

How to Determine the Correct Tax Code for Employees

Common Tax Code Mistakes

FAQs on Tax Codes in New Zealand

Simple Tax Code Management with Payroll Software

Table of Contents

Introduction

What Are Tax Codes and Why Are They Important?

Different Tax Codes in New Zealand and Who They Apply To

- Main Tax Codes
- Secondary Tax Codes
- Other Tax Code
- Student Loan Code
- Tailored Tax Code

How to Determine the Correct Tax Code for Employees

Common Tax Code Mistakes

FAQs on Tax Codes in New Zealand

Simple Tax Code Management with Payroll Software

Tax codes are more than just a random assortment of letters. They’re important so that employees are taxed correctly, which keeps everyone compliant with New Zealand’s tax regulations. In this blog post, we’ll explore the intricacies of tax codes in New Zealand, breaking down what they are, who they apply to, and how to avoid common mistakes.

What Are Tax Codes and Why Are They Important?

Tax codes are essentially a set of instructions from the Inland Revenue Department (IRD) that instruct the employer, or in most cases, a payroll system, how much tax to deduct from an individual’s income, with relation to their earnings.

You want to make sure to get the tax code right for a few reasons:

Legal Compliance: Incorrect tax codes can lead to underpayment or overpayment of tax, which will result in a tax bill for the employee at the end of the tax year (31st March) from the IRD.

Employee Satisfaction: No one likes unexpected tax bills or feeling like they’ve overpaid. Accurate tax codes help maintain a positive work environment.

Streamlined Payroll: The right tax code simplifies the payroll process, making it easier to manage and less prone to errors.

High Non-declaration Rate: Failing to choose an appropriate tax code can result in being placed on a non-declaration rate, which has a high withholding rate of 45%.

It is important to note, though, that choosing the correct tax code is not the employer’s responsibility to bear. It is up to the employee to notify the employer of their correct tax code. Employers may get in trouble if they try to assume the employee’s tax code. So it’s completely in the employee’s hand to provide the employer with the correct tax code if they want to avoid the non-declaration rate.

Different Tax Codes in New Zealand and Who They Apply To

New Zealand has a variety of tax codes, each designed for specific circumstances. These codes vary based on an individual’s earnings and the nature of their income—main or secondary.

Main Tax Codes

You’ll likely encounter the “M” and “ME” codes most often. These codes are designed for those whose earnings come primarily from one job.

M: This means this occupation is the employee’s main source of income. Therefore their PAYE for their earnings should be calculated according to each relevant tax bracket, and not a flat tax rate. This is the most common tax code that you’ll see.

ME: This also means this occupation is the employee’s main source of income, but they earn less than $48,000 per year. Therefore their PAYE for their earnings should be calculated according to each relevant tax bracket, and not at a flat tax rate. The special designation helps determine the employee’s eligibility for benefits such as the Independent Earner Tax Credit (IETC), which could allow them to receive up to a $10 tax credit per week.

Secondary Tax Codes:

Any code starting with an “S” indicates a secondary income. So, if an employee is on the M code for their main job and picks up a second source of income, that extra income will be taxed under a different code. The rate for this secondary tax code is determined based on their main income.

SB: This means this occupation is the employee’s secondary source of income, but they earn $14,000 or less across all sources of income, and therefore their PAYE should be taxed at a flat rate of 10.5% (excluding the ACC Earners’ Levy) for any payments.

S: This means this occupation is the employee’s secondary source of income, but they earn between $14,001 and $48,000 across all sources of income, and therefore their PAYE should be taxed at a flat rate of 17.5% (excluding the ACC Earners’ Levy) for any payments.

SH: This means this occupation is the employee’s secondary source of income, but they earn between $48,001 and $70,000 across all sources of income, and therefore their PAYE should be taxed at a flat rate of 30% (excluding the ACC Earners’ Levy) for any payments.

ST: This means this occupation is the employee’s secondary source of income, but they earn between $70,001 and $180,000 across all sources of income, and therefore their PAYE should be taxed at a flat rate of 33% (excluding the ACC Earners’ Levy if relevant) for any payments.

SA: This means this occupation is the employee’s secondary source of income, but they earn over $180,000 across all sources of income, and therefore their PAYE should be taxed at a flat rate of 39% for any payments.

Here is a table of what secondary income will be taxed based on their annual main income.

Other Tax Codes

Not all jobs fit neatly into the categories of “main” or “secondary” income. These special tax codes ensure that your unique employment circumstances are accurately reflected in your tax withholdings.

CAE: This relates to Casual Agricultural Employment, however, do not get this confused with the NSW tax code. If you employ an individual for agricultural work for a short fixed-term period, then their tax code should likely be CAE. This means their PAYE is taxed at a flat rate of 17.5% (excluding the ACC Earners’ Levy) for any payments, similar to the S tax code.

NSW: This relates to Non-resident Season Workers. This is primarily used for individuals under the Recognized Seasonal Workers (RSE) scheme, but it could also apply to other industries if the employee is employed fixed-term as a non-resident. This means their PAYE should be calculated at a flat rate of 10.5% (excluding the ACC Earners’ Levy) for any payments, similar to the SB tax code.

EDW: This relates to Election Day Workers. This would not relate to most forms of employment, however it means that their PAYE should be calculated at a flat rate of 17.5% (excluding the ACC Earners’ Levy) for any payments, similar to the S tax code.

Student Loan

SL: This is not a tax code in itself, but it simply means the employee has a student loan. The SL can be added on to any “M” or “S” tax codes, depending if the employee has a student loan or not.

Tailored Tax Code

It’s worth noting that even with the correct tax code, the exact tax amount is rarely deducted unless you’re receiving a fixed, consistent income. Tax codes are designed to estimate your annual earnings, and if your work schedule or income varies, this estimate can be off the mark. That’s why most people end up with either a tax bill or a refund at the end of the tax year.

If you find yourself consistently receiving a tax bill, you might consider applying for a tailored tax code through the IRD. This allows for a more accurate estimate of your annual income, reducing the likelihood of an end-of-year tax bill.

How to Determine the Correct Tax Code for Employees

Determining the correct tax code is primarily the employee’s responsibility. While employers can guide them on where to find the necessary forms, it’s really up to the employee to figure out their tax code and inform their employer.

If you’re an employee and need to know how to make sure your correct tax code is set up when you onboard, here’s how to go about it:

Start with the IRD: Your first stop should be the Inland Revenue Department (IRD). They offer a detailed guide and a tax code declaration form, known as the IR330. While it’s not the employer’s role to choose your tax code, they can point you to where you can find this form.
- Online Option: The IRD website has an online tool that asks a series of questions about your income and circumstances. At the end of the questionnaire, it suggests the most appropriate tax code for you.
Employee Declaration: Once you know your tax code, it’s your job to inform your employer or the appropriate HR department. This is often done as part of a new employee file. If you don’t need to fill out an employee file, make sure to communicate your tax code to your employer through other means, whether that’s through an email or even just a text if that’s how you communicate with your employer.
- Paper or Digital Forms: Whether your employer uses paper forms or digital platforms, you might need to submit the IR330 form to make it official.
Review and Update: Life changes, like getting a student loan or a second job, can affect your tax code. Make it a habit to review your tax code when significant changes happen.
IRD Notifications: If you end up using the wrong tax code, the IRD will first notify you. If no change is made, they’ll then notify your employer.

By following these steps, you can ensure that you’re on the most appropriate tax code, making tax time a breeze and keeping your payroll smooth.

Common Tax Code Mistakes

Using the Wrong Code: This is the most common mistake and can lead to the IRD notifying you to make a change. Always consult the IRD if you’re unsure. Note that in some cases, if you insist on using a different tax code because you believe the one assigned to you is not correct, the IRD may allow your employer to follow your instruction over the IRD’s.

Failure to provide Tax Code: If you fail to provide your tax code to your employer, then your employer can justifiably put you on the non-declaration rate.

Not Updating Codes: Life happens—marriage, new jobs, and other big changes can mean your tax code needs a tweak. Make sure to update as needed to avoid any end-of-year surprises. In most cases, tax codes will need to change when you start earning more.

Ignoring Student Loans: If you or an employee has a student loan, remember to add “SL” to the primary tax code. This ensures the right amount is being paid back.

While incorrect tax codes can create complications, it’s worth noting that the responsibility primarily lies with the employee to provide the correct tax code. The Inland Revenue Department (IRD) generally doesn’t hold the employer accountable for errors, especially since employees often end up with a tax bill or refund at the end of the tax year regardless of the code used.

FAQs on Tax Codes in New Zealand

Here’s some of the most frequently asked questions we get from our customers to our payroll experts. While we’ve touched on some of these topics earlier in the blog, a dedicated FAQ section can serve as a quick and handy reference to reinforce and clarify key points.

What Happens If I Use the Wrong Tax Code?

Using an incorrect tax code can lead to either a tax bill or tax refund at the end of the financial year:

Overpayment: If too little tax is withheld, you may receive a tax bill at the end of the financial year. In this case, the IRD will notify you about the amount owed and the due date for payment. You’ll need to pay this amount by the specified deadline to avoid any further complications. Failure to pay by the due date may result in penalties and interest charges.

Underpayment: On the other hand, if too much tax is taken out, you’ll end up with less take-home pay and may be eligible for a tax refund. The IRD will usually notify you, often through your online myIR account. Refunds are often automatically deposited into your bank account if the IRD has your details, but in some cases, you may need to manually claim your refund.

Who Is Responsible for Making Sure I Use the Right Tax Code?

Employer: The employer’s primary responsibility is to ensure that employees are taxed correctly based on the tax code provided. They collect the IR330 form if required from new hires and update the payroll system to reflect the correct tax code.

Employee: It’s up to the employee to provide the correct tax code. Employees should also notify their employer to update their tax code whenever their circumstances change, such as after getting a student loan or taking on a second job.

What If I Don’t Have My Tax Code?

If you fail to provide a tax code to your employer, they have the option to use what’s known as the “non-declaration rate” for your tax withholding. This rate is generally set at a higher percentage, currently at 45%. The idea behind this elevated rate is to protect both the employer and the government from potential underpayment of taxes. However, it usually results in significantly higher tax withholding from your pay, which is why it’s considered a harsh measure.

A more lenient and commonly used approach is for employers to default to the “M” tax code until you can provide the correct one. This ensures that you’re not overtaxed while you sort out your proper tax code. It’s in your best interest to resolve this as quickly as possible to ensure that you’re being taxed at the appropriate rate.

Simple Tax Code Management with Payroll Software: Why Choose Crystal Payroll

Tax Efficiency with Payroll Software

From easy employee onboarding to automated tax calculations, a good payroll system can be a game-changer when it comes to managing tax codes and ensuring accurate, timely filings.

Why Crystal Payroll is Your Best Choice

Crystal Payroll is designed to be feature-rich, aiming to provide you with the best payroll experience possible. That’s why we’ve focused on making tax code management simple, straightforward, and error-free. With our system, you can confidently say goodbye to tax code mistakes. Here’s what we offer:

Employee Onboarding and Offboarding

The tax code is one of the first things that should be sorted during the employee onboarding process. Establishing the correct tax code from the outset helps in accurate tax withholding, which in turn streamlines the payroll process and minimizes the risk of future tax-related issues. Similarly, during offboarding, the tax code helps in calculating final pays, including any holiday pay, bonuses, or other entitlements.

From the moment you set up a new employee in our system, you’ll find that handling tax codes is straightforward and efficient. During the initial employee setup, you won’t be overwhelmed with options. The system simply prompts you to select the appropriate tax code for the employee. With just one click, a series of calculations occur in the background, ensuring that the correct amount of PAYE is deducted from each paycheck.

Easy Tax Code Updating

Mistakes happen, and when they do, our user-friendly settings allow employers to easily update an employee’s tax code. These changes take effect from the next pay-run, keeping your payroll accurate and up-to-date. If you’ve already processed and filed a pay-run with an incorrect tax code, you have the option to amend and re approve those periods. However, in most cases, it’s advisable to let the IRD handle any adjustments, as they can determine whether the employee is due for a tax refund or owes additional taxes at the end of the year.

Payday Filing

With features like Payday Filing, Crystal Payroll can automatically send the required tax information to the IRD every payday. This real-time reporting not only simplifies the filing process but also ensures that the tax codes are applied correctly for each pay cycle.

Tailored Tax Calculations

For employees with unique tax situations, such as tailored tax codes or multiple income streams, our payroll software can handle these complexities with ease.

Record-Keeping and Auditing

Good payroll software like ours maintains a detailed record of all transactions, including tax withholdings based on each tax code. This is invaluable during an audit or when you need to backtrack and verify historical data.

Choose Crystal Payroll to ensure your pay-runs are not only taxed correctly but also filed in compliance with New Zealand’s tax regulations.

Disclaimer: This blog post is intended for informational purposes and should not be considered as financial or legal advice. Always consult with professionals for tailored guidance.

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PAYE Simplified: Understanding Your Payroll with Crystal Payroll’s Free Calculator

Crystal Payroll — Thu, 06 Jul 2023 05:45:27 +0000

Demystifying PAYE: What is it?

Why Use a PAYE Calculator?

Understanding and correctly calculating your tax obligations is crucial, whether you’re an employer making payments to the IRD, or an employee looking to gain a better understanding of your pay. Crystal Payroll’s user-friendly PAYE calculator provides a reliable, simple solution to help you work out your tax deductions accurately and swiftly.

Demystifying PAYE: What is it?

PAYE, or Pay-As-You-Earn, refers to the process where a specific percentage of wage or salary earnings are withheld and paid to the government as tax. Each payday, tax deductions are made from gross earnings and transferred to the IRD. Besides income tax, PAYE may also include other income-based deductions like KiwiSaver contributions, student loan repayments, and child support payments.

Why Use a PAYE Calculator?

A PAYE calculator like Crystal Payroll’s offers several advantages:

Budgeting: By calculating your net pay, you can get a clear picture of what’s left for your expenses. With our PAYE calculator, you simply enter your details to visualize your net income.

Evaluating job offers: If you’re considering a new job and want to understand your potential take-home pay, a PAYE calculator offers valuable insights into what you have been offered and the amount you’ll be taking home.

Verifying system calculations: While it’s rare for system calculations to go awry, if the figures seem off, you can cross-check your details with our PAYE calculator for verification.

Crystal Payroll’s PAYE calculator is known for its ease-of-use. With only essential inputs required—such as your tax code, pay frequency, and any income-based deductions—you’ll receive clear, understandable results quickly.

Navigating through PAYE calculations can feel daunting, but with Crystal Payroll’s intuitive tool and a team dedicated to staying up-to-date with legislation, we simplify the process. We’re here to help you make accurate tax payments with ease and confidence.

Compare our tool with the IRD’s PAYE calculator and see the difference for yourself. Our goal is to make payroll management as simple as possible for you.

Try Crystal Payroll’s PAYE Calculator Now

Ready to take the first step towards simplified payroll management? Experience the convenience of our PAYE calculator today.
Or get started with a free demo of Crystal Payroll.

Try Crystal Payroll’s PAYE Calculator Now

Try Crystal Payroll for Free

After using our calculator, if you have any queries or need further assistance, don’t hesitate to reach out to our dedicated customer support team. We’re always here to help you make sense of your payroll needs.

The post PAYE Simplified: Understanding Your Payroll with Crystal Payroll’s Free Calculator appeared first on Crystal Payroll.