Welcome again to the McLean and Co. Newsletter in which we discuss current taxation and business matters. We trust you find it informative.  

 

We are happy to accept new clients.  We would be happy to assist colleagues and acquaintances as new clients.

 

INDEX

1. Reminder- Income Tax Due

2. New Minimum Wages Rates take Effect from 1 April 2013

3. 2014 PAYE Tables Available

4. 1 April 2013 Tax Related Changes

 

I

IMPORTANT!!!!!

Make sure you read right to the end of this Email Newsletter.  There are a number of changes as at 1/4/2013 which may effect you.

 

REMINDER- INCOME TAX DUE

Many of our clients are due to pay 2012 year Income Tax amounts by 7/4/2013 and 2013 Provisional Income Tax amounts by 7/5/2013.  We recommend you look at the Tax Assessments that we have provided you to check if you are liable, and pay by due date.

When you pay make sure that you advise IRD the correct year your payment relates to.   If it relates to  Terminal Tax for the year end 31/3/2012 Income Tax Assessment  then IRD should be advised that it relates to the year ending  31/3/2012.  

We have noted cases of clients advising IRD it is for the 2013 year in this instance, just because the client is paying it in the 2013 year (even though it relates to the year ending 31/3/2012).   IRD will process exactly as they are advised.  Getting a payment in the wrong year creates an issue which requires  concern to clients when they are forwarded  Statements of Account that don't reflect what they believe is their correct tax position, and extra rectification action.   So take care!!!!

 

NEW MINIMUM WAGE RATES TAKE EFFECT FROM 1 APRIL 2013

The new adult minimum wage rates (before tax) that apply to employees aged 16 or over will be:

$13.75 per hour, which is
$110.00 for an 8-hour day,
$550.00 for a 40-hour week.

The new entrants' minimum wage rates and the training minimum wage rates (before tax) will increase to:

$11.00 an hour, which is
$88.00 for an 8-hour day or
$440.00 for a 40-hour week.

The new entrants' minimum wage applies to a person who:

• is 16 or 17 years old, AND
• has not completed three months or 200 hours of employment, whichever is shorter, AND
• is not supervising or training other workers, AND
• is not subject to the training minimum wage.

  The training minimum wage applies to people who are required by their employment agreements to undertake recognised industry training involving at least 60 credits a year.

Starting Out Wage

The new 'starting-out wage' will be an option for employers and employees from 1 May this year. The starting-out wage will give employers a real incentive to give young people a foothold on the employment ladder.

Three groups will be eligible for the starting-out wage. These are:

• 16- and 17-year-olds in their first six months of work with a new employer (or until they are training or supervising others)
  
• 18- and 19-year-olds who have been paid a benefit for six months or longer, and who have not completed six months of continuous work with any employer since starting on benefit (or until they are training or supervising others)
  
• 16- to 19-year-old workers in a recognised industry training course involving at least 40 credits a year.

  Under the starting-out wage, eligible 16- to 19-year-olds can be paid 80 per cent of the adult minimum wage for six months OR for as long as they are undertaking recognised industry training of at least 40 credits per year.

  The starting-out wage sits alongside other government initiatives aimed at helping more young New Zealanders into work or training, including Work and Income's Job Streams.

  From 1 May 2013 the starting-out wage will replace the new entrants wage and training minimum wage for under-20s.

 

2014 PAYE TABLES AVAILABLE

The PAYE tables for the 2014 tax year are now available

under “Forms and guides”.

The new tables reflect recent rate changes, which come into effect on 1 April 2013. These changes will affect how much you deduct from your employees’ salary and wages.

 

1 APRIL 2013 TAX RELATED CHANGES

Government announced several tax-related changes as part of Budget 2011 and Budget 2012. Below are some of the changes happening on 1 April 2013.

The key changes you need to be aware of are around tax codes, KiwiSaver and student loans. You'll need to check your payroll system will be ready for the changes.

KiwiSaver Contribution Rate Change

From the first pay period starting on or after 1 April 2013, the contribution rate for employers and employees increases from 2% to 3% of gross salary or wages.

You'll need to change the contribution rates for existing KiwiSaver members if their contribution rate is 2%. If your employee contributes at either 4% or 8% there is no need to change their contribution rate. If no rate is selected use the default rate of 3%.  The rate change will also apply to employees who belong to a complying fund.  Employee and net employer contributions to a complying fund are paid directly to the complying fund.

You will also need to contribute a minimum of 3% as your compulsory employer contribution for all eligible employees.

The default rate for new employees who are automatically enrolled in a KiwiSaver scheme will now be 3% of gross salary or wages from the first pay period starting on or after 1 April 2013. The rate change will also apply to employees who belong to a complying fund.

All employer cash contributions to a superannuation fund (including KiwiSaver schemes and complying funds) are liable for ESCT (employer superannuation contribution tax). You will therefore have to recalculate ESCT on the revised basis  if you are calculating your employee's wages and decuctions. The exception is if the employee and employer have agreed to treat all of the employer contribution as salary or wages under the PAYE rules.

Employing Primary and Secondary School Children

From 1 April 2013 you must deduct PAYE from salary or wages or deduct tax from schedular payments made to school children. The details will need to be included on your Employer monthly schedule (EMS/IR348).

They will need to complete a Tax code declaration (IR330) form by 1 April 2013 and give it to you so you can apply the correct tax rate.

If your employee is a KiwiSaver member you may also need to start making employee deductions at 3% of gross salary or wages. If the employee is less than 18 years old, you don't need to make employer contributions.

ML and ML SL tax codes no longer used

Employees earning less than $9,880 can no longer claim the under $9,880 tax credit during the year by using the "ML" or "ML SL" tax codes. If any employees are using either the "ML" or "ML SL" tax code, you must deduct PAYE using the tax codes "M" or "M SL" (if they have a student loan) from 1 April 2013, unless your employees have given you a new IR 330.

Student loan repayment rate increase

From 1 April 2013 the rate for standard student loan repayments increases from 10% to 12%.

For employers, the student loan standard deductions shown on the Employer monthly schedule (EMS/IR348) for the period ended 30 April 2013 and all future periods should be 12%.

Employees with a special tax code

For some employees the standard tax codes (eg, M, ME, S, SH or ST) or the tax rates on schedular payments don't deduct the right amount of tax for their overall annual income. This can mean they're significantly over- or under-taxed.

Employees can apply for a special tax code so a reduced or increased rate of PAYE can be applied.

If an employee gives you a special tax code certificate you need to:

• check that it's valid - special tax codes have an expiry date
• deduct PAYE at the rate shown on the certificate (this can be 0%)
• show "STC" as the employee's tax code on your Employer monthly schedule (EMS/IR348).