New Zealand

Registrations and Establishing an Entity 

Registrations must be made through the company’s office and all details can be located through the website.

If a company has to pay employees in New Zealand, it will need to register with the IRD as an employer. The form required to do this is an IR334 form which can be found through the IRD website.

To set up a business, the following steps are required:

• Register a company with the Companies Office
• Obtain an IRD (Inland Revenue Department) number
• Register as an employer using the IR334 form

Employment Law

A standard working week in New Zealand is typically Monday to Friday totalling 40 hours. Working hours for commercial offices are generally 8am to 5pm. Typically, lunch breaks range from between 30 minutes to one hour.

All employees are entitled to at least four weeks paid holiday a year.

Employees get their annual holiday entitlement on their first and subsequent anniversaries after starting work. There is no capping on annual leave accrued hours.

Annual Leave taken is paid at an average calculated rate. It is the higher of either the employees previous twelve months “Average Weekly Earnings” (AWE) or their “Ordinary Weekly Pay” (OWP).

Entitlement for annual leave in between an employee’s anniversary, is accrued as “Holiday pay.” That being 8% of the employee’s gross earnings per pay, is accrued from one anniversary to the next. On each anniversary this amount resets to zero and the employee receives four weeks leave entitlement.

When an employee terminates, they receive a payout for any unused annual leave hours accrued up until their last anniversary and the lump sum holiday pay that has accrued after their last anniversary until termination date.

From 24 July 2021, there is a minimum provision of 10 days paid sick leave per year after the first six months of continuous employment, and an additional five days’ sick leave after each subsequent 12-month period, capped to a maximum accrual of twenty days.

Maternity Leave 

The government-funded scheme, which is administered by the IRD covers payments for 14 weeks. For more information on this, visit the IRD website here.  

Unpaid maternity leave entitlement is up to 14 weeks, which can start up to 6 weeks before the expected birth of the child.  Employees with 12 months eligible service are entitled to an additional extended leave of up to 52 weeks. 

Paternity Leave 

Unpaid paternity leave is up to two weeks for mother’s partner on the birth or adoption of a child. 

Tax Laws

Tax Year: The tax year runs from 1st April to 31st March.

Tax Code: An individual’s tax code is dependent upon how many sources of income an individual has and whether the individual has a student loan.

Filings: There is no requirement for a third party to be licensed in order to make any tax and/or social security filings on the behalf of a client.

Contributions: New Zealand employees & employers KiwiSaver minimum contribution 3%. This is a compulsory scheme for employers if an employee has opted in.

Further information can be found via the following governmental websites:

• Inland Revenue Department
• Kiwi Saver

Business Taxes

The New Zealand tax system is administered by Inland Revenue (‘IRD’). The standard New Zealand tax year ends on 31 March; however, companies can apply for a Substituted Accounting Period (‘SAP’) with the IRD to align its financial year with that of a foreign owner.

A New Zealand resident company is liable to pay New Zealand tax on its worldwide income at the applicable corporate tax rate.

A non-resident company is only liable to pay New Zealand tax on its New Zealand sourced income, at the applicable corporate tax rate.

Business Tax Rates

Goods and Services Tax (GST)
GST is levied at a flat rate of 15 percent of the value of goods and services consumed in New Zealand (including imports). Businesses must register when their GST turnover exceeds 60,000.

Fringe Benefits Tax (FBT)
FBT is imposed on both resident and non-resident employers who provide certain benefits to employees and their associates.
Employers can pay FBT at either a single rate of 63.93% or calculate using the alternate rate.

FBT Rates

Key Tax Considerations:

• No comprehensive capital gains tax
  
  
• Tax consolidation available
  
  
• Tax losses can be carried forward indefinitely (with conditions)
  
  
• OECD-based transfer pricing rules
  
  
• Thin capitalisation rules apply
  
  
• Double Tax Agreements with over 40 jurisdictions
  
  
• Withholding taxes: Dividends 30%, Royalties 15%, Interest 15%

Payroll Operations Payroll

On 1st April 2019, ‘Payday Filing’ came into effect.

All employer reporting obligations which were previously submitted via an EMS and EDF, are now submitted directly from the payroll engine to IRD no later than two days after payday. This is real-time reporting and ensures that liabilities that are paid into IRD when net wages are paid to employees and are allocated in a timely manner to the respective employer accounts.

While paper or electronic payslips are still very common in many workplaces, unless there is an agreement to do so, an employer is under no specific legal obligation to provide a payslip.

In the interest of ensuring that everyone understands when and how wages or salaries have been calculated and paid, an employee has the right to access or obtain a copy of the employer's wage and time records relating to that employee. This record must be kept by the employer for each of their employees. It would include details such as, but not limited to:

• The kind of work the employee does
  
  
• The amount of hours/days that the employee works
  
  
• The wages paid to the employee each week and the method of calculating those wages
• The nature of the employment agreement
  
  

Payroll reports must be kept for at least seven years. The records can be kept electronically as long as the records can be printed out on request.

Reports

• Records must be retained for 7 years
• Employers report income tax and KiwiSaver contributions via myIR

New Employees

To register a new start, a completed IRD declaration form will be sent to the IRD by the HR/payroll department of the clients or provider. The employee must be registered as soon as they start work, and the IRD number can be issued within 24hrs at a cost of $12 or 10 working days for a standard application.

If employees have no IRD number or form, they are automatically taxed at the highest rate. When setting up a new start, the following information is required:

Personal & contact information such as:

• Name
• Address
• Phone number
• Date of birth
• Start date
• Personal tax details provided by completing the IRD declaration form
• Superannuation details by completing the KiwiSaver form

Leavers

KiwiSaver
KiwiSaver is a voluntary, work-based savings initiative to help employees with their long-term saving for retirement. There are a range of membership benefits like regular contributions from the employer and an annual member tax credit paid by the government.

KiwiSaver is not guaranteed by the government, and the schemes are managed by private sector companies called KiwiSaver providers. Employers can choose which KiwiSaver provider to invest their money with.

An employee can join KiwiSaver if he/she is:

• a New Zealand citizen, or entitled to live in New Zealand indefinitely, and
• living or normally living in New Zealand (with some exceptions), and
• below the age of eligibility for NZ Super (currently 65)

An employee can’t join KiwiSaver if he/she is:

• holding a temporary, visitor, work or student permit
• living overseas, unless he/she is a government employee:
  
  • serving outside New Zealand, and
  • employed on New Zealand terms and conditions, and
  • serving in a jurisdiction where offers of KiwiSaver scheme membership are lawful.

Employees are automatically enrolled (if eligible) on starting a new job unless they elect to opt out within a certain period. KiwiSaver is deducted from gross pay each pay period. Currently an employee can choose to contribute at 3%, 4%, 6%, 8% or 10%.

A liability to pay employer Superannuation Contribution Tax (ESCT) arises when an employer makes a cash contribution to a superannuation scheme (including a KiwiSaver fund) that meets the definition of a superannuation fund, subject to certain exemptions. Generally, the rate of tax withheld is based on the employee’s marginal tax rate.

Expenses

Typical benefits provided in New Zealand include the following:

• Medical plan
• Meal voucher
• Transportation

All benefits and/or expenses are paid by the employer; however, they are not processed through the payroll.

Visas

New Zealand Immigration allows many visitors to enter the country with a visa-waiver for a limited period of time only. The period of time is usually a maximum of three months, but is extended to six months for holders of United Kingdom passports.

Australian residents do not require a visa to enter New Zealand.

For those residing in New Zealand or visiting for a longer period of time, a visa will be required. The applicant should apply via their nearest New Zealand embassy prior to travel. Further information can be found at the New Zealand Immigration website.

Location-specific considerations

Dates & Numbers

• Dates are usually written in the day, month and year sequence. For example, 1 July 2024 or 1/7/24.
• Numbers are written with a period to denote thousands and a comma to denote fractions. For example, NZ$ 3.000,50 (three thousand dollars and fifty cents).

Banking

It is not mandatory to make payments to employees or the authorities from an in-country bank account.

Further Information

For more information, or assistance with New Zealand Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.