July 2024 Tax Changes

Everything you need to know about the 31 July 2024 tax changes - even when you don’t need to do a thing!

PaySauce has you sorted for the income tax changes on 31 July 2024. We’ve already made all the necessary adjustments to PaySauce’s calculations, so there’s nothing you’ll need to do differently when you process your pays.

If you have any automatic bank payments (APs) set up to pay employees their net pays, you’ll need to update these. We highly recommend that wherever possible you get PaySauce to do the banking for you, as net pay amounts can change for a number of different reasons (and this is one of those times!)

A bit of background

New Zealand has a progressive tax system. This means that the rate of tax increases as a person’s income increases. These tiered tax thresholds are often referred to as tax bands. In the pay run, the income tax is calculated as though that person was receiving that same amount each pay for the whole year. You can read more about this in our blog post here.

So what’s changing?

The government has increased the tax thresholds. This means that less tax will be paid as more of an individual’s pay will fall into the lower tax rates. These changes are happening part way through the current tax year.

What are the new thresholds?

The tax rates are staying the same, but the thresholds for each rate are increasing.

What will I see when I’m processing payroll?

You may notice the net amounts for your employees have changed. This is because a different amount of tax is being deducted from their pay.

Another thing you’ll probably notice while processing payroll will be the thresholds for the Independent Earner Tax Credit (IETC) will change for those on ME or ME SL tax codes.

Tax rates on extra pays have not changed - yet!

Extra pays are different types of payments that use a flat rate of tax instead of the progressive tax bands we use on ‘normal’ earnings. Extra pays are things like termination pays, annual leave cash ups, or anything you add as a ‘lump sum’. You can read more about lump sum payments here.

IRD has instructed that the ‘old’ thresholds still apply to these types of payments until the end of the financial year, so you won’t see those changes until 1 April 2025.

IRD are doing this to reduce the likelihood of any tax bills at the end of the year. It might look strange to see two different sets of thresholds used for tax on wages, but this will only be the case through to the end of this financial year.

Is there anything I need to do?

If you’re using PaySauce, there’s nothing you need to do when processing your pays to have the tax changes applied. We’ve already made all the changes required to ensure it will all work for you from 31st July onwards.

Outside of PaySauce, you should ensure that you use the new IR330 (tax code declaration) from IRD when employees start with you or change their tax code. To view the new form, click here.

What if the 31st July falls in the middle of a pay period?

Tax is calculated based on when it was paid, rather than when it was earned. The new tax rates will apply for any pays paid on or after 31st July. The new tax rates will apply to the whole period.

What if I have an agreed fixed net amount with my employee?

We’re aware that sometimes employers may have a contracted agreed net amount with an employee. If this is the case for you, the gross pay will need to be adjusted to reflect the new tax that will be deducted from your employees pay. We always recommend that you use agreed gross (before tax) amounts rather than net.

How can I check if the calculations are correct?

The IRD website has been updated with heaps of useful information. You can check your payments, and if you’re really interested in the nitty gritty, you can take a look at the IRD Employers Guide which sets out all of the calculation rules. You’re also more than welcome to contact our wonderful Support team if you have any questions or need some reassurance!