The IRD has been reinforcing its position with employers not meeting their payment obligation. Non-payment penalties are issued by the IRD to employers who fail to pay their employer monthly schedule (EMS) obligations in full or on time.

A non-payment penalty is 10 % of the amount outstanding and applies when non-payment continues after the IRD issues a notification. A further 10 % penalty will be added each month the debt remains outstanding.

Employers experiencing financial difficulties are advised to contact the IRD before the due date to set up an instalment arrangement to avoid penalties. Once the amount outstanding has been paid in full, or an instalment arrangement has been set up, the last 10 % penalty will automatically be reduced to 5 %.

Employers are also reminded to file their EMS by the due date, or risk paying a late filing penalty of $250 for each schedule received late.

The Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 introduces changes to secondary tax rates and new calculations for extra pays/lump-sum payments, effective from 1 April 2010.

New RWT, secondary tax, RSCT and extra pay rates from 1 April 2010
$0 - $14,000
12.5%

$14,001 - $48,000
21%

$48,001 - $70,000
33%

$70,001 and over
38%

Current RWT deductions at the rate of 19.5 % will automatically be moved to the new 21% rate – employees with an expected income under $14,001 or over $48,000 should change their RWT rate accordingly. Incorrect RWT rates might lead to unwanted tax bills.

New secondary tax codes and thresholds from 1 April 2010
$0 - $14,000
Tax code (no student loan): SB

$14,001 - $48,000
Tax code (no student loan): S
Tax code (with student loan): S SL

$48,001 - $70,000
Tax code (no student loan): SH
Tax code (with student loan): SH SL

$70,001 and over
Tax code (no student loan): ST
Tax code (with student loan): ST SL

Employees can change their secondary tax codes by obtaining a Tax code declaration form (IR330) from their employer. If you use payroll software, these new rates should be incorporated into your payroll package for pay periods ending on or after 1 April 2010.

The IRD recently updated and clarified some of its legislation relating to the treatment of relocation payments, overtime meal allowances and sustenance allowances. If you have taxed any of these since the 2002 – 2003 income year, you might be entitled to a PAYE credit – depending on whether the tax-free conditions for each category have been met. A PAYE adjustment can be claimed by completing the Employer monthly schedule amendments (IR344) form. The IRD should also be informed in writing of any adjustments to income tax returns.
Relocation payments are tax-free when:

• relocation is required as a result of new employment or a change of location.
• the employee’s existing home is not within reasonable travelling distance
• the expensive is part of the eligible relocation expensive list
• the payment is no more than the actual expenditure
• the expenditure occurred before the end of the tax year during which the employee relocated

Overtime meal allowances are tax-free when:

• the employee’s contract or employer’s policies specify overtime meal allowances
• the payment is no more than the actual cost incurred
• the employee has worked at least two hours of overtime

Sustenance allowances are tax-free when:

• there is an established policy of paying sustenance allowance
• the employee works a minimum of 7 hours per day
• the employee is required to work outdoors, away from their employment or is required to undertake a long period of physical activity in travelling
• it is not practical to provide sufficient sustenance to the employee

Businesses should ensure they are complying with the new international accounting practices established under the International Financial Reporting Standards (IFRS). A recent review of reports by the Securities Commission highlights that many businesses are still facing some difficulties changing from a system of commercial confidentiality to one of disclosure.

Under IFRS, forecasts should include information about underlying assumptions that drive topline numbers, and asset revaluations and impairments should include an explanation of methodology. IFRS aims to provide the investor with an insight into management thought and company performance.

The International Financial Reporting Standards for financial reporting purposes were adopted in New Zealand in 2005, and made mandatory from periods beginning on or after 1 January 2007 for entities that have to comply with generally accepted accounting practice (GAAP).