What you need to know
Payday filing is a significant change to the way companies report payroll information. New Zealand employers will need to ensure they are compliant by 1 April 2019.
Under payday filing, employers will need to report employee payments to Inland Revenue (IR) every pay run. To enable the increased reporting frequency, a communication system will be created to seamlessly connect payroll systems with IR.
Like KiwiSaver, the introduction of payday filing means every affected employer will need to either upgrade or replace their payroll system by 1 April 2019 in order to meet their payroll reporting obligations.
We encourage you to watch this short video to help better understand payday filing (previously called Payday Reporting).
What is payday filing?
Payday filing is a New Zealand government initiative that changes the way businesses report on employee payments such as salary or wages, pay as you earn (PAYE) and other deductions. Under payday filing this payroll information will be sent electronically, directly to IR every payday rather than monthly as is presently the case.
Employers who report through payday filing will no longer need to file the Employer Monthly Schedule (EMS).
New employees joining an organisation will be able to complete a single online form which combines the requirements of the Tax code declaration (IR 330) and KiwiSaver deduction (KS2).
PAYE reporting process
|Manual send or upload of data to IR
||Payroll information filed directly from payroll system
|Various ways to comply, for example, paper forms or online via myIR
||Utilises normal pay run processing
|$100,000 threshold for online filing of PAYE
||$50,000 threshold for online filing of PAYE
||Every payday (within two working days of paying staff)
|EMS to be completed monthly
||EMS not required
|Manual collection and entry of new employment forms (Tax code declaration (IR 330) and KiwiSaver deduction (KS2))
||Online, pre-filled form for new employees which combines the requirements of IR 330 and KS2 forms
|Payroll subsidy for employers who outsource their PAYE obligations to listed payroll intermediaries
||Payroll subsidy ceases from 1 April 2020
How payday filing will impact you
All New Zealand employers must commence payday filing before 1 April 2019.
Employers with $50,000 or more of PAYE and employer superannuation contribution tax (ESCT) deductions a year will need to upgrade to a payroll system that is payday filing compliant and review some of their payroll procedures.
Employers whose combined PAYE and ESCT deductions are less than $50,000 a year have the option to file online or file paper returns.
If you are eligible to file paper returns, you can choose to either:
- file the Employment Information Schedule within ten working days of paying staff, or
- file two Employment Information Schedules — on the 15th of the month and the last day of the month.
Attaché Software and other industry stakeholders are currently working with IR on the overall solution design for payday filing. The level of complexity involved with payday filing means it is unlike the usual compliance upgrades. If you are using an older version of payroll software, you should upgrade to the latest version now to ease your transition to payday filing and minimise disruption to your business.
In 2013, all employers in the United Kingdom went through a similar transition to Real Time Information (RTI). Despite having a 2½ year transition period, most businesses said they would have liked more time.
Australian businesses are required to comply with a similar initiative called Single Touch Payroll. Employers with 20 or more employees on 1 April 2018 must conform to these new regulations by 1 July 2018. For those with 19 or less employees, the compliance date is 1 July 2019.
What you can do now
There are around 50,000 employers in New Zealand who will need to transition to payday filing within a relatively short window.
As payday filing will require either an upgrade or replacement of your existing payroll system, you should start reviewing your requirements now. The introduction of payday filing is an opportunity to refresh your broader business systems.
You should ask yourself whether you have outgrown your current payroll or accounting software. Does it contain all the features you need? Have your requirements changed as your business has grown? Are there time-consuming manual processes that could be automated with a new system?
Starting this review well before the deadline gives you time to consider your options and implement your decision before the inevitable last-minute rush.
To find out more, speak to one of our payroll specialists on 0800 288 224.
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