What you need to know

Payday Reporting is a significant change to the way companies report payroll information. New Zealand employers will need to ensure they are compliant on or before 1 April 2019.

Under Payday Reporting, employers will need to report employee payments to Inland Revenue (IR) every pay run. To enable the increased reporting frequency, a communication system will be created to seamlessly connect payroll systems with IR.

Like KiwiSaver, the introduction of Payday Reporting means every affected employer will need to either upgrade or replace their payroll system before the end of FY18 in order to meet their payroll reporting obligations.

These proposed changes to the way payroll information is reported are included in a tax bill introduced to parliament in April 2017.

We encourage you to watch this short video to help better understand Payday Reporting.

What is Payday Reporting?

Payday Reporting is a New Zealand government initiative that changes the way businesses report on employee payments such as salary or wages, pay as you earn (PAYE) and other deductions. Under Payday Reporting, this payroll information will be sent electronically directly to IR at the same time as the employer pays their employees.

Employers who report through Payday Reporting will no longer need to file the Employer Monthly Schedule (EMS).

New employees joining an organisation will be able to complete a single online form which combines the requirements of the tax code declaration IR 330 and KiwiSaver deduction KS2.

How Payday Reporting will impact you

Employers with $50,000 or more of PAYE and ESCT deductions a year will be required to conform to these new regulations sometime between the voluntary opt-in date of 1 April 2018 and the mandatory compliance date of 1 April 2019.

This means you will need to upgrade to a Payday Reporting compliant payroll system and review some of your payroll procedures.

Attaché, and other payroll software vendors, are currently working with IR on the overall design of Payday Reporting. The level of complexity involved with Payday Reporting means it is unlike the usual upgrades for tax scales. If you are using an old version of payroll software, you should upgrade to a new version now to minimise the effort involved in your transition to Payday Reporting.

International experience

All United Kingdom employers went through a similar transition four years ago to Real Time Information (RTI). Despite having a 2½ year transition period, most businesses said they would have liked more time.

Australian businesses are currently in their voluntary phase of opt-in to Single Touch Payroll. Compliance for employers with 20 or more employees is required on or before 1 July 2018 and by the commencement of the following financial year for smaller employers.

What you can do now

There are around 50,000 employers in New Zealand who will need to transition to Payday Reporting within a relatively short window.

As Payday Reporting will require either an upgrade or replacement of your existing payroll system, you should start reviewing your requirements now.

You should ask yourself whether you have outgrown your current payroll or accounting software. Does it contain all the features you need? Have your requirements changed as your business has grown? Are there time-consuming manual processes that could be automated with a new system?

Starting this review well before the deadline gives you time to consider your options and implement your decision before the inevitable last-minute rush.

Next steps

The passing of legislation for Payday Reporting is imminent. There will be more announcements from the government, payroll providers and employer associations in the lead up to the deadline and beyond.

To find out more, speak to one of our payroll specialists on 0800 288 224.