SMALL BUSINESS RESOURCES

PAYE: deduction tables and tax rates

4 min read

As a New Zealand business owner, you’re obliged to learn your employer responsibilities to the IRD. But with the help of learning PAYE tax rates, PAYE tables and PAYE deduction tables, you’ll understand them in no time.

There are intricacies to calculating and paying tax on behalf of employees, depending on pay periods, individual employee circumstances and pay brackets.

Before we get into using weekly, fortnightly, and monthly tax tables for employee payments, let’s find out what’s fundamental to it all – PAYE.

What is PAYE?

PAYE stands for ‘pay as you earn’. As an employer, you must deduct PAYE from your employee’s renumeration and pay it to the Inland Revenue Department (IRD) on their behalf.

  • PAYE refers to the combined income tax and ACC earners’ levy. 
  • There are different rates of PAYE depending on the employee’s renumeration and other conditions.
  • On top of PAYE, you might have to deduct other amounts such as student loan repayments, child support and KiwiSaver deductions.

ACC earner’s levy

All employees must pay the ACC levy which covers no-work injuries. The earners’ levy deduction is $1.39 GST-inclusive per $100 of earnings.

Student Loans

Employers are required to deduct student loan repayments through the PAYE system, at the standard deduction rate. Employees can also request that an employer deducts additional funds to pay off a student loan quicker.

KiwiSaver

KiwiSaver is a voluntary long-term savings scheme designed to help an employee put money away. Employers must deduct this in their PAYE activity and enrol the employees in the scheme.

PAYE calculator

An exceptionally simple and compliant way to understand your PAYE obligations is to follow the on-page instructions and use the IRD’s PAYE Calculator here.

Employer’s PAYE responsibilities

As a New Zealand business owner and employer, your PAYE responsibilities are as follows:

  • You must have first registered for an IRD number. 
  • You must fill in an ‘Employment Information – IR348’ form complete with details of deductions you have made from your employees’ renumeration. If the employers gross annual PAYE (including ESCT) deducted is $50,000 or more, employers must file this information electronically. More information on employee information and payday filing here.
  • Employees must now deduct PAYE from all employee’s renumeration and pay to the IRD before the due date.

PAYE: Tax Rates

For the 2020/21 year, there are four tax brackets and rates:

Tax rate

Taxable income bracket

​Tax owed

10.5%

$0 to $14,000

10.50% of taxable income

17.5%

$14,001 to $48,000

$1,470 plus 17.50% of the amount over $14,000

30%

$48,001 to $70,000

$7,420 plus 30.00% of the amount over $48,000

33%

$70,001 or more

$14,020 plus 33.00% of the amount over $70,000

 

PAYE: Deduction tables

If you’re starting a business and need to understand your exact PAYE responsibilities as an employee, you’ll need to refer to the IRD’s deduction tables.

These PAYE deduction tables are designed to adapt to the specific pay periods your business has chosen as a way of distributing employee renumeration. 

You can either pay an employee weekly, fortnightly or monthly. The below tables are designed to cover employers PAYE responsibilities across all such pay periods.

Weekly tax tables

If you pay your employee weekly and require information on weekly tax tables, see the IRD’s tax table guide here.

Fortnightly tax tables

If you pay your employee fortnightly and require information on fortnightly tax tables, see the IRD’s tax table guide here.

Monthly tax tables

If you pay your employee monthly and require information on four-weekly or monthly tax tables, see the IRD’s tax table guide here.

For all further information on PAYE, see the IRD website here.