A small business owner says changes to the way pay is reported to the Inland Revenue is like an indirect tax and it will quadruple the time he has to spend on filing information about his staff.

But the IRD says its move to payday filing is aimed at reducing compliance costs, especially for small businesses.

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From April next year, all businesses have to file information about their employees' pay to the IRD within two days of paying them. Currently, this information is sent once a month in an employer monthly schedule.

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An Auckland small business owner, who doesn't want to be named for fear of reprisals, said what now took him about an hour to do once a month would now have to be done four or five times a month.

The man has nine permanent staff which he pays on a weekly basis.

"I just see this as another tax."

The man says he only found out about the changes at a seminar in October.

"They have kept this very quiet until it was fait accompli."

"We haven't been consulted about this whole process."

But Richard Owen, a customer segment leader at Inland Revenue said it began consulting about payday filing back in November 2015 before it became law.

"Payday filing became optional from April 2018 and we already have nearly 10,000 employers on board."

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Over the last three months, it had held nearly 400 seminars across the country, attended by more than 14,000 people.

Owen said once all employers had moved onto the new system in April it would be able to
simplify income tax for all individual taxpayers and help more people to pay the right amount of tax at the right time.

"And we'll be able to ensure customers receive the right entitlements such as Working for Families payments."

The businessman said he felt like employers were being used as tax collectors and social welfare collectors and they had to do it on their own time.

"We are not getting paid for this."

The man said he had complained to the Inland Revenue and was told to change the frequency of staff payments to fortnightly.

"But that's not something you can go and do unilaterally. All of the staff have budgeted for weekly pay."

Owen said it did not give any direction on how many times a month an employer should pay their staff.

"That's something for employers to decide. If your contact has been told that, we're sorry because that's not the right advice. It's not Inland Revenue's role to get involved in employer/employee arrangements."

The businessman said he also felt there was a lot of pressure to use payroll software which he said was uneconomical for a business of his size.

"They are quite expensive to us and I'm not sure they can account for everything."

He said sometimes staff entered data in incorrectly which he had to fix.

"I'm not sure a payroll provider can pick that up."

Owen said using payroll software made it easier for an employer because the information came direct to Inland Revenue through the software.

"However, we appreciate that some employers feel that their business is too small to use the software.

"We've designed our myIR portal to help them give us the information we need as easily as possible."

While it anticipated all employers would be able to switch to the new system by April it recognised some employers may not be ready in time, Owen said.

"We will provide support, education and assistance to help employers get on board with this new approach before we consider imposing penalties."

Employers can find out more on the payday filing changes at www.ird.govt.nz/payday.