Types of Deductions

Deductions from Employee Wages
As an employer you must make the correct PAYE (pay as you earn) deductions from your employees' earnings using the appropriate tax code, meet your filing and payment obligations with regard to PAYE, pay any liable fringe benefit tax (FBT) and specified superannuation contribution withholding tax (SSCWT).

Other types of employee deductions and your obligations include:

1. Tax codes and making PAYE deductions

The amount of PAYE you deduct depends on your employee's tax code. Be aware of using the different kinds of tax codes, such as primary, secondary and special tax codes, and the no-declaration tax rate.

2. Completing your employer deduction forms

IRD will send you an Employer deduction (IR345) form before you have to make each payment. This is for you to record the deduction details and send them with your payment. If you are registered with IRD as a payer of SSCWT, you receive an Employer deduction SSCWT (IR346) form instead. Learn how to complete these two forms.

3. ACC earner's levy

Employers must make these ACC deductions for ACC earners' levy to cover the cost of non-work-related injuries and the ACC earners' residual account levy to fund the cost of non-work injuries claimed from 1 April 1992 to 30 June 1999. The ACC earners' levy deduction covers both these amounts and is built into the PAYE tax table deductions.

4. Child support deductions

Child Support assesses and collects child support from parents who do not live with their children. Employers may be asked to make deductions from an employee’s pay. IRD will send you a Deduction Notice explaining how to make and pay the deductions. Employers are required by law to do as requested.

5. Fringe benefit tax

FBT must be paid by employers providing fringe benefits, how to file an FBT return and what to do if there are payment difficulties and how this can help you.

6. Student loan deductions

Some employees may need to make repayments to Inland Revenue for a student loan. They will use a student loan tax code on their Tax code declaration.

7. Superannuation fund contributions

Any contribution an employer makes to a superannuation fund for the benefit of an employee is liable for tax. Learn about tax on superannuation funds and meaning of 'specified superannuation contributions'.

8. Withholding tax

Withholding tax is deducted from payments to people who are not employees but work for you on a contract-for-services basis.

9. Deductions for special types of workers

There are some types of workers that may require a different treatment for deductions. These include casual agricultural workers, commission agents, directors, IR56 taxpayers, partners in a partnership, screen production industry, shareholder-employees in close companies, spouses and students.

10. Deductions from payments to non-residents

Here IRD defines New Zealand non-residents and identify their tax obligations. IRD also explain the tax status of non-resident employees, contractors and entertainers.