Employer Obligations
Employee vs. Contractor Payments
Employees
Employees are remunerated with salaries or wages. Employers must deduct the appropriate tax before making payments.
Contractors
Contractors, on the other hand, are paid using Schedular Payments, which may include a Goods and Services Tax (GST) component. These payments require different tax treatment compared to employee wages.
Tax Deductions and Employer Responsibilities
PAYE and Other Deductions
Employers must deduct tax from employee salaries and wages. This includes:
- PAYE (Pay As You Earn) – Standard income tax deductions.
- Employer Superannuation Contribution Tax (ESCT) – Deducted from employer contributions to KiwiSaver.
- Student Loan Repayments – Deducted if the employee has an outstanding student loan.
- Child Support Payments – Deducted as per IRD requirements.
- ACC Earner Levies – Included in PAYE but not in Schedular Payments.
Forms Required for Employees and Contractors
Employers and contractors must complete specific tax forms:
- IR330 – Tax Code Declaration: Required for employees receiving salaries or wages.
- IR330C – Tax Rate Notification: Required for contractors to determine the correct tax deduction rate.
Reporting and Payment Frequency
Employers must submit employment information to the IRD every time they pay employees. This could be on a:
- Weekly basis
- Fortnightly basis
- Monthly basis
Allowances and Taxability
Allowances paid to employees can be taxable or non-taxable, depending on the nature of the payment. Employers must determine whether an allowance falls under taxable income or qualifies for tax-exempt status.