Changes are coming to the way that businesses deal with their employees' tax payments — and I think it's a positive move for identifying and reducing errors in our PAYE system. As long as IRD's system can cope also.
IRD is to introduce compulsory payday filing next year although you can opt in now if you want to get a feel for how the system works in preparation for it being compulsory.
Businesses with a payroll of more than $50,000 will have to file a PAYE return electronically within two days after they pay staff, rather than the current once or twice a month. The idea is that this will happen directly from payroll software.
That means some businesses will be filing every week.
IRD says this will mean another step towards "seamless tax collection" and reduce the time and effort spent on compliance.
That's certain if you have the software. If you run a manual payroll I suggest you change to a supported online system that integrates with myIR to make life a lot easier. Do the work now to ensure your software is able to comply if payday filing applies to you.
Most payroll software is integrating this as part of their process/services with no extra charges.
What payday filing also hopes to achieve is a reduction in errors in entitlements such as working for families.
Payment of the PAYE has remained once a month, but I wonder if this will change in the future if this process is accurate and successful.
If in the future PAYE has to be paid each payday businesses may need to alter their payment terms to encourage swifter payments. Businesses also would no longer get the benefit of money sitting in their accounts, perhaps offsetting interest charges, for the month.
IRD has shown recently that its systems are not infallible. There will need to be processes in place to ensure that problems are caught and rectified quickly.
Jeremy Tauri is an associate at Plus Chartered Accountants.