New Zealand Payroll – An Overview of the Requirements for Multinational Businesses

New Zealand Payroll - An Overview of the Requirements for Multinational Businesses

By Eva Kolasinski

Taumatawhakatangihangaoauauotameteaturipukakapikimaungahoronukupo-kaiwhenuakitanatahu. This is not a misprint! At 85 letters, this is the longest place name found in any English speaking country; rough translation: “the place where Tamatea, the man with the big knees, who slid, climbed and swallowed mountains, known as the land-eater, played his nose flute to his loved ones”. Welcome to New Zealand!

An island nation located in the southwestern Pacific Ocean, New Zealand geographically comprises two main islands and around 600 smaller islands. It was one of the last lands to be settled by humans due to its remoteness. Eastern Polynesian settlers were the first people to reach the islands by about 1300. They developed a distinctive Maori culture and were followed hundreds of years later by Europeans predominantly from Britain. In 1907 New Zealand became a Dominion within the British Empire and Queen Elizabeth II remains the country’s head of state.

Culture

European sports are dominant, especially rugby where the Maori tradition of performing a Haka before international matches has become legendary. The arts also feature strongly. International opera star Dame Kiri Te Kanawa was born in Gisborne, the first city in the world to greet the sun each day. Kiri means ‘bell’ in Maori, prophetically matching her vibrant soprano. The first man to reach the peak of Mount Everest, Sir Edmund Hillary, was born in Auckland. His face is on the New Zealand $5 bill. But cash is seen less and less here. It has become a plastic nation; almost all financial transactions are made via card.

Immigration

Immigration continues to increase due to the attraction of New Zealand’s distinct biodiversity of animal and plant life, its varied topography and its quality of life. It’s National performance ranks high in areas such as health, education and economic freedom. Just over 25% of New Zealand’s population was born overseas. Even though Wellington is the capital, actually the southernmost capital city in the world, the most populous city is Auckland. And if you are searching for Middle-earth, look no further than New Zealand. Nearly all scenes of the Lord of the Rings films were shot in New Zealand. Tourism is now the second largest industry featuring Tolkien tours allowing you to join the fellowship and walk in the footsteps of Frodo.

Lastly, one can’t discuss New Zealand without giving a nod to the ‘kiwi’. So many meanings in such an odd little word! Kiwi is a nickname for the local New Zealander, the name of a native flightless bird and the kiwifruit grown in the country. You just have to know the context!

New Zealand Payroll Overview

The authorities in New Zealand have developed a tax system that is comparatively easy to navigate. It is also a relatively favorable tax environment for earnings and assets. For example, there are no local or state taxes apart from property rates levied by local councils and authorities, no payroll tax, no social security tax apart from superannuation schemes, no health care tax apart from a very low levy for New Zealand’s accident compensation injury insurance scheme.

Business Registration

New Zealand is rated one of the easiest places in the world to do business in. Registration is required, but there are few restrictions and the authorities make it a smooth process.

New Zealand Employer Payroll Obligations

Social security arrangements are referred to as superannuation. The New Zealand Superannuation (NZ Super) is a government pension with no specific social security contributions or ‘working life period’ based requirements. The full pension is payable if the eligibility conditions are satisfied. The pension is funded out of general taxation.

The most popular of the private superannuation schemes is KiwiSaver. KiwiSaver is a voluntary savings initiative to help set up employees for retirement. Most members will build up their savings through regular contributions from their pay. Although individuals are automatically enrolled into the scheme when they enter the workforce or change jobs, they can opt out.

Employees can contribute 3, 4, or 8 percent of their income. The individual and employer must both contribute to the scheme if the individual doesn’t opt out.

Employer contributions to KiwiSaver are equal to 3% of employee pay. The employer does not have to make compulsory contributions to the employee KiwiSaver account if:

• They are already paying into another eligible registered superannuation scheme for the employee, as long as the existing scheme meets certain criteria
• The employee is under 18 years of age
• The employee is over 65 years of age or has been a member of KiwiSaver for five years, whichever date is later
• The employee is not contributing, even if on a contributions holiday or on leave without pay.

ESCT

Employer superannuation contribution tax (ESCT) is the tax the employer takes off the cash contributions made to employees’ superannuation accounts, including KiwiSaver. The employer only pays ESCT on cash contributions to an employee’s super scheme. For KiwiSaver, this means employer pays ESCT on the compulsory 3% employer contribution, and any voluntary extras, but not on the contributions deducted from the employees’ wages or salary.

The rate of ESCT to deduct can vary for each staff member. At the beginning of each tax year, the employer must work out the ESCT rates for staff. This will vary since it is based on each employee’s salary and length of employment. Once the rate for each employee is known, the employer will make the deduction every payday from their gross employer cash contribution to each employee, and add up the total ESCT for all staff.

Income Tax

New Zealand residents are liable for tax on their worldwide taxable income. Income tax is Pay As You Earn (PAYE). A PAYE is a withholding tax on income payments to employees. Amounts withheld are treated as advance payments of income tax due. The employer collects these each month and pays them (along with ESCT) to Inland Revenue by the 20th of the following month. They are refundable to the extent they exceed tax as determined on tax returns.

Income tax returns are filed on an annual basis to the New Zealand Inland Revenue Department (IRD). The deadline is by April of the following year.


The above facts just scratch the surface of New Zealand Payroll. If you would like to obtain further information on New Zealand payroll or any one of the 150+ countries that Celergo covers, please contact us.

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