Check your pay after tax changes, workers told

By Teuila Fuatai

Employers must update their payroll systems.

 Photo / Thinkstock
Employers must update their payroll systems. Photo / Thinkstock

Workers have been warned to double-check their pay slips when tax changes to KiwiSaver and ACC levies come into play.

The changes include the removal of the 2 per cent tax exemption for the minimum employer contribution to KiwiSaver, and a reduction in the ACC Earner Levy from $2.04 to $1.70 per $100 of earnings.

General manager of business software firm MYOB NZ, Julian Smith, says that while the April 1 tax changes are fairly minor for employees, failing to adjust payrolls will result in overtaxing.

"There are always changes to the system, but this year they are quite specific and technical."

"Our main concern is that they can easily be forgotten, especially as ACC and KiwiSaver often fall below the radar," said Smith.

The drop in the Earners' Account Levy, which is paid by wage and salary earners, reduces the cost of ACC on employees.

Smith says employers must update their payroll systems for workers to receive the full benefit of this.

"It is far better for workers to pocket the savings from the ACC levy changes rather than it accidentally go back to the IRD."

"Workers can put it towards their own personal costs or savings, which is essential in the sluggish economic climate."

The average Work Account Levy paid by employers will also decrease from $1.47 to $1.15 per $100 of liable earnings.

The removal of the 2 per cent tax exemption means employer contributions to KiwiSaver will be taxed at the employee's top tax rate.

Finance Minister Bill English has said the tax exemption was being axed because it unfairly favoured higher income-earners and had to be considered against programmes like Working for Families and interest-free student loans.

Separate tax codes for employees with student loans are also being introduced on April 1, making it compulsory for all those with student loans to use a student loan tax code.

This story has been corrected from an earlier version which incorrectly said the ACC Earner Levy had fallen from $2.04 to $1.07 per $100 of earnings. The correct figure is $1.70 per $100 of earnings.

- NZ Herald

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