New Zealand payroll and tax overview.

New Zealand is one of the southwest Pacific’s most developed and economically successful nations, offering its residents high wages and a high standard of living. Located to the southeast of Australia, across the Tasman Sea, New Zealand comprises two main landmasses: the North Island and the South Island. Historically an agrarian economy, New Zealand’s financial profile was driven by a global demand for wool, meat and dairy products until the mid-19th century. After an economic downturn in the 1970s, New Zealand diversified, moving beyond its traditionally agricultural roots to develop a vast services sector and a range of large-scale manufacturing industries like metal, textiles, wood, and paper. Industries including mining, food processing, electricity, gas, and waste management also expanded in the 20th century along with the tourism industry, which grew significantly as an economic contributor and helped define New Zealand’s international profile. New Zealand has major trading partners across the world, including the EU, the United States, China, Malaysia, Japan, South Korea, and Australia, and is a member of the OECD, APEC, ANZUS, and the UN. The 51st largest economy in the world by GDP, today, New Zealand’s economic success continues and has topped the Ease of Doing Business rankings in 2017, 2018, 2019, and 2020.

Why Invest in New Zealand?

As one of the APAC region’s most prominent economies, there are plenty of reasons to invest in New Zealand, including:

• Economic Strength: New Zealand offers stability and low inflation, and an economy ranked amongst the top 20 sovereigns in the world. Privatisation of utilities and state services has made New Zealand a highly competitive, business-friendly environment.
• Free Trade Agreements: As a supporter of trade liberalisation, New Zealand has struck numerous free trade agreements with partners all across the world, including Australia, China, South Korea, and the EU. It is also a signatory of the Trans-Pacific Partnership.
• Transport Infrastructure: Businesses in New Zealand benefit from extensive transport links to the rest of the country, including excellent road and rail links, and sea connections between the two islands. New Zealand has 7 international airports and is serviced by all major airlines.
• Business Start-up Potential: The process of setting up a business in New Zealand takes approximately three days, and is known for its ease and simplicity. The OECD ranks New Zealand 3rd for cross-border transactions with foreign partners.
• Research & Development: New Zealand has a track record of commercially successful innovation. 40% of New Zealand’s R&D expenditure comes from the private sector, and the country’s ‘Nine Crown’ Research Institute leads the world in public research and commercially-viable ventures - especially in the fields of pharmaceutical production and earthquake monitoring.

Registering a Company and Establishing an Entity in New Zealand

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

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.

Business Banking in New Zealand

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

What Are the Working Days and Working Hours in New Zealand?

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

Basic Facts about New Zealand

Situated in the southwest Pacific Ocean, the nation of New Zealand actually consists of around 600 individual islands, with two main landmasses: North Island and South Island. Historically, New Zealand served as a home to the Maori people, having been settled by Polynesians in the mid 13th century. Later, in the mid-17th century, European explorers arrived in New Zealand to colonise and, in 1841, the country became part of the British Empire. Today, New Zealand is a sovereign nation, with power vested to a democratic parliament led by a prime minister. It is home to large British and Maori-heritage populations but its society is diverse, with significant demographics of Asians and Pacific Islanders. New Zealand’s closest neighbours are Australia to the west, the islands of Fiji, Tonga, and New Caledonia to the north, and Antarctica to the south - but the country has developed strong links across the APAC region. With a range of dramatic natural environments - from snow-capped alps, to volcanic plateaus and jungles - New Zealand is one of the most geographically diverse nations on earth. The country experiences a predominantly temperate climate throughout the year but weather patterns vary sharply across its islands: summers in the north can be hot and dry, but harsh snowfall is common in locations on South Island.

General Information

Full Name: New Zealand

Population: 4.917 million (World Bank, 2019)

Capital: Wellington

Major Language: English, Maori

Major Religion: Christianity

Monetary Unit: New Zealand Dollar ($NZ)

Main Exports: Wool, food products, dairy products, wood and paper products

GNI per Capita: US $42,710 (World Bank, 2019)

Internet Domain: .nz

International Dialling Code: +64

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

Income Tax in New Zealand

A solidarity surcharge tax rate is levied on the actual income tax amount. Withholding tax statement and payments are due to be paid to the authorities by the 10th of the following month.

The typical penalty awarded for the late submission is a maximum 10% of the assessed tax. Interest due for late payment is 6% per annum.

Social Security in New Zealand

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:

1. serving outside New Zealand, and
2. employed on New Zealand terms and conditions, and
3. serving in a jurisdiction where offer 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.

Reporting Tax in New Zealand

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.

New Employees in New Zealand

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:

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

Leavers in New Zealand

Payment for leavers must be made by the final day of employment or by agreement.

Payroll in New Zealand

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 interests 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.