Payday filing is here – what small businesses need to know

The Government has passed a bill to make Payday filing information reporting mandatory from April 2019 for smaller businesses – so what do you need to do?

Summary

• A bill has now been passed to change how and when Payday filing information is reported to the Inland Revenue.
• Payday filing is voluntary from April 2018 and mandatory from April 2019.
• The Employer Schedule (IR348) and Employer Deduction form (IR345) will no longer be required to file each month. Instead, you’ll file an Employment Information (EI) return online every payday.
• Mandatory electronic filing threshold is reducing from $100,000 in PAYE/ESCT per year to $50,000 per year.
• We are working closely with the IR to build this functionality into MYOB software to enable the new reporting requirements and will keep you updated on progress.

What’s happening?

Payday Payday filing streamlines the filing of Payday filing information by removing the need for a reporting process separate from processing payroll.

You’ll be able to use your payroll software to talk directly to IR, so that Payday filing information is reported as it is calculated each pay run.

This will save you time and help you meet your record keeping obligations by storing your Employment Information (EI) electronically for easy retrieval.

It will also improve accuracy by providing more up to date information to IR so they can check the correct tax and entitlements are being paid throughout the year.

READ: Payday reporting for bigger businesses

What will reporting look like?

You’ll no longer need to file the Employer Monthly Schedule (IR348) every month.

Instead, you’ll file an Employment Information (EI) return directly from your payroll software each payday. The Employer Deduction form (IR345) must still be filed separately as usual.

This mandatory change effects Payday filing reporting only.

But from April 2018 employers will have the option of paying their Payday filing and related deductions to Inland Revenue on payday to align with their filing, but will not be required to do so.

Who will this affect?

If your Payday filing/ESCT deductions are greater than $50,000 (the equivalent to fewer than ten full-time staff on the minimum wage) you’ll be required to file online.

If you fall below this threshold you can choose between filing online or paper returns.

When will this come into effect?

Payday filing is voluntary from April 2018, and mandatory from April 2019.

Online filers will be required to file an Employment Information (EI) return within two working days after payday and paper filers within seven working days.

Why is this happening?

IR administers a number of the Government’s social policy programmes including working for families tax credits, child support, student loan repayments and KiwiSaver contributions.

The Payday filing system is used by employers to withhold income tax and ACC earner’s levy from employees’ salary and wages and pay these directly to the Inland Revenue, as well as collect payments and information.

Many of these social policies came into effect over time and under various governments, resulting in different rules and processes applying to each type of payment.

This caused complexity, confusion and increasing compliance and administrative costs.

With this change, the IR is aiming to improve the accuracy of deductions at the source and reduce these costs for all involved.

The downstream benefits also help match social assistance entitlements with periods of needs in near-real time and better manage social policy debt.

So what are my next steps?

• Review your payroll system and processes now, before payday filing becomes compulsory. If it’s time to make the move online, check out MYOB Essentials for free.
• If you want to stay ahead of IR changes, MYOB Essentials already has the functionally to automate your Payday filing payments and reporting, as well as wage payments to employees for you with MYOB PayAgent. See how it works here.
• See Payday filing for more information