Doing business in New Zealand - Grant Thornton

Employee taxes: PAYE
Employers are required to register
with New Zealand Inland Revenue and
deduct ‘pay as you earn’ (PAYE) tax for
wages, salaries and taxable allowances
paid to employees who are subject to
New Zealand tax. Consequently, nonresident
employers with employees
working in New Zealand must register
and deduct PAYE unless the employee
is exempt from New Zealand tax in
accordance with domestic law (see
non-resident employees: exemption,
p25) or a tax treaty (see non-resident
employees: treaty tax exemption, p22).
Tax returns of individuals are filed
in accordance with the general position
previously outlined (see tax year end,
p19; annual tax return and assessment,
p20; tax payment obligations and timing
p20; use of money interest (UMOI),
p20). There is a notable exception in the
case of salary and wage earners having
minimal investment income, in which
case no returns need to be filed.
Compulsory accident insurance (ACC)
Employees are subject to a compulsory
levy on earnings from employment that
is capped at a fixed level of earnings.
The levy applicable to the 2012/13 tax
year is 1.70% (inclusive of GST) and is
capped at earnings of NZD$113,768 for
that year (or $111,669 for self-employed
earners). The levy provides personal
accident insurance cover for loss of
earnings as a result of workplace and
recreational injury and disability.
KiwiSaver
KiwiSaver is a voluntary, work-based,
superannuation scheme which requires
a minimum 2% contribution from
employees with a range of benefits also
provided to members, including:
• A one-off $1,000 kick-start for
entering the scheme
• Compulsory employer contribution
of 2%
• Tax credit available to members from
the Government of up to $521.43 per
year
• First home deposit subsidies
• Savings withdrawals for first homes
The minimum employee contribution
is proposed to increase to 3% from 1
April 2013, matched by an increase in
the employer contribution to 3%.
Goods and services tax (GST)
GST tax base
GST is a consumption tax imposed
on the supply of goods and services in
New Zealand with limited exemptions,
notably financial services (such as
the issue and sale of debt instruments
and equities), salaries and wages and
the provision of residential rental
accommodation. GST is also levied by
Customs on goods imported into New
Zealand.
GST is borne by the final private
consumer. It is imposed throughout
the chain of production and therefore
applies to business-to-business
transactions, but businesses registered
for GST receive credit for the GST paid
on goods and services they purchase.
GST is levied at the rate of 15%
(increasing from 12.5% on 1 October
2010). Some supplies are zero-rated
(GST at 0%), including exported goods
and services. Zero-rated supplies are
treated as taxable supplies and not
exempt supplies, so GST registered
taxpayers can still recover the GST paid
on related purchases.
There is a limited regime for the
zero-rating of financial services to
businesses, which allows financial
service suppliers to recover some of
their GST costs.
Compulsory zero-rating also applies
to supplies that include land and that
are made between registered parties
where the purchaser acquires the goods
with the intention of using them for
making taxable supplies and is not
intending to use the land as a principal
place of residence.
Registration
Registration for GST is mandatory if
supplies of taxable goods or services
exceed NZD$60,000 in any 12 month
period, or are expected to. Voluntary
registration is permitted, enabling
businesses making annual taxable
supplies below this threshold to obtain
GST refunds for supplies received from
other GST-registered businesses.
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