Changes are happening and as an Employer there are some things you need to know for the start of the new financial year.
What you need to know
The minimum wage is increasing from 1 April 2021:
• The adult minimum wage is increasing from $18.90 to $20.00 per hour
• The starting-out and training minimum wage rates is increasing from $15.12 to $16.00 per hour
And the following changes are effective for any payments made from 1 April 2021. So, if you are posting a March pay run that is paid on 1 April, the changes apply to the whole March pay run.
The student loan repayment threshold is increasing from $385 to $390 per week. Xero takes care of this automatically for you.
A new top tax rate of 39% has been added for income over $180,000. The existing 33% tax rate now applies to income between $70,001 and $180,000. Xero takes care of this automatically for you.
A new Employer Superannuation Contribution Tax (ESCT) rate of 39% has been added. This applies where earnings plus superannuation is over $216,000. The existing 33% ESCT rate now applies where earnings plus superannuation is between $84,001 and $216,000.
New secondary income tax codes have been added. The rate for SA and SA SL is 39% for estimated annual income greater than $180,000. The Accident Compensation Corporation (ACC) Earner’s Levy does not apply to these new tax codes.
ST and ST SL secondary income tax codes have been changed. The rate of 33% stays the same, but these codes now apply where the estimated annual income is between $70,001 and $180,000. Previously this was for all income over $70,000. The ACC Earner’s Levy continues to apply to these tax codes.
What you need to do
Update the salary and wages information for employees on minimum wage, if necessary.
Review your employees’ ESCT rates to make sure they’re based on what the employee actually earned the previous tax year. You should do this between your last pay run in March and your first pay run in April. You can review the ESCT rates from the employee’s taxes tab. Two Xero reports can help with this: the Annual Earnings Certificates report and the Gross Earnings report.
Any employee on the ST or ST SL tax code whose total annual earnings from all jobs is likely to exceed $180,000 will need to provide an updated IR330 tax declaration form specifying the new SA or SA SL tax code.
It’s a good time of year to run a leave liability report and make sure your leave liability accounts are up to date. Also, check your PAYE in the balance sheet to make sure any amounts owing have been paid to Inland Revenue by the due date.
We hope this makes it easy to manage your payroll for year-end. As always, if you need a hand, we are here to help!
