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McLEAN AND CO.
McLEAN AND CO MARCH 2009 NEWSLETTER PAGE
PERSONAL INCOME TAX AND THRESHOLD CHANGES
Reductions to personal tax
rates and thresholds will start on
employees who make PAYE
payments directly to Inland Revenue (IR 56 customers), and
individuals who file IR3 tax
PAYE rates and thresholds:
rates and thresholds from
INDEPENDENT EARNER TAX CREDIT (IETC)
IETC is for
veteran's pension, or |
foreign equivalent of any of the above. |
(Cont. Page 3)
AND CO MARCH 2009 NEWSLETTER
Receiving the Tax Credit
you're eligible you can choose to receive the IETC through your pay or
as a lump sum at the end of the year. If you work for a
you will receive the tax credit through your pay after
Eligible for part of the Year?
If you receive the above forms of government assistance for
part of the year and would otherwise qualify for the tax credit, you
will be eligible for the months of the year you don't receive the above
forms of government assistance.
received the unemployment benefit from
If you become a
Working for Families Tax Credit
If you, or your partner or spouse receives Working for
Families Tax Credits (or a similar foreign entitlement) you won't be
eligible for the IETC.
Student allowance, ACC, paid Parental Leave, Accommodation
If you receive a student allowance, ACC payments, paid
parental leave or the accommodation supplement you will still be
eligible for the independent earner tax credit if you meet the other
The changes to personal income tax rates and
thresholds, and the introduction of the independent earner tax credit
(IETC) will affect all employers. In the near future IRD will be issuing
new PAYE tables as follows:
Weekly and fortnightly (IR340)
Monthly and four-weekly (IR341)
These new tables will apply for pay periods ending
on or after
IRD are also updating the IR330 so employees who want to
receive the IETC through their pay can do this via a new tax code. The
new tax codes are ME and MESL for employees with a student loan. New
employees starting work during March, who will be eligible for the IETC
and are planning to use one of the new tax codes, will initially need to
use one of the existing main income source tax codes. They will then
need to complete another IR330 to start using ME or MESL from their
first pay on or after 1 April.
If your employees’ circumstances change during the year this
may mean their eligibility for IETC also changes. As a result, your
employees may need to change their tax code several times during the
(Cont. Page 4)
AND CO MARCH 2009 NEWSLETTER
minimum employee contribution will reduce to 2% of your gross pay.
compulsory employer contribution (CEC) will increase to 2% and won't
increase further in future years
employer superannuation contribution tax (ESCT) exemption will be capped
at the Compulsory Employer Contribution of 2%.
employer tax credit (ETC) will be removed - this change affects
employers, not KiwiSaver members.
fee subsidy will be removed.
KiwiSaver Act has been amended and the Employer Relations Act amendment
relating to KiwiSaver has been repealed so that your gross pay can't be
reduced if you join KiwiSaver. This change is effective from
If you're already a member of KiwiSaver you'll be able to
reduce the amount you contribute from your pay to 2% from
If you want to reduce your contribution, you'll need to let
your employer know in writing. Either complete a new KiwiSaver
deduction form (KS2) or write to your employer.
If you're a new member and you don't tell your employer how
much you want deducted from your pay, the employer will assume you want
to contribute 2%.
Your employer will increase their contribution to 2%
(and won't increase it any further) from
If your employer contributes more than 2% to your KiwiSaver
If your employer contributes 2% there'll be no change to
your employer contributions.
contribution to 2% may affect the amount of Member Tax Credit you
on your income, if you do reduce your contribution to 2% it may affect
how much member tax credit
(MTC) you receive.
If you're eligible, the
Government will pay into your KiwiSaver scheme an annual member tax
credit matching your contributions up to $1,042.86 per year (this works
out to about $20 per week). If you reduce your contribution to 2% of
your gross pay, you might not contribute enough to your KiwiSaver scheme
to receive the maximum member tax credit. You can make voluntary
contributions to your KiwiSaver account so that your contributions total
$1,042.86 each year.
your income is less than $52,000 and you reduce your contributions to 2%
of your gross pay, you'll need to make voluntary contributions if you
want to receive the maximum member tax credit.
If your income is more than $52,000 you can reduce your
contributions to 2% of your gross pay and you'll still receive the
maximum member tax credit.
(Cont. Page 5)
AND CO MARCH 2009 NEWSLETTER
minimum employee contribution rate will reduce to 2% of a member's gross
contribution (CEC) will increase to 2% and won't increase further in
employer superannuation contribution tax exemption (ESCT) will be capped
at the compulsory employer contribution rate of 2% from
employer tax credit
(ETC) will be removed.
fee subsidy will be removed - this change affects KiwiSaver members, not
KiwiSaver Act will be amended and the Employer Relations Act amendment
relating to KiwiSaver will be repealed so that gross pay can't be
reduced for staff who join KiwiSaver.
need to increase your employer contribution rate to 2% from 1 April 2009,
but won't be required to contribute more than this amount in future
years unless you want to.
may need to reduce the contribution rates for existing KiwiSaver
if they notify you that they would like to change their contribution
rate to 2%. You should ask
your staff for written confirmation of their intention to reduce their
contribution rate - ask them to complete a new KiwiSaver deduction form (KS2) or to write to
you. There is no need to contact IRD.
New employees who join and are automatically enrolled after
you choose to contribute more than 2% into the KiwiSaver accounts of
(that is more than the amount exempt from employer superannuation
contribution tax), you'll have to pay employer superannuation
contribution tax (ESCT) on the contributions above 2%.
can be taxed in one of the following ways:
a flat rate of 33 cents in the dollar;
optional ESCT rate based either on the annual
the employer contribution as
Eddie is a KiwiSaver member and employed by ABC
Limited. He is having 4% of his
Joanne is a KiwiSaver member and employed by Black
Limited. Joanne is having 4% of her
ESCT is paid on your IR345 Employers Deductions monthly return to IRD. The cost of this is a tax deductible expense.
If we can assist further, please email McLean and Co. as follows:
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