Change your tax number to NZ Super and Veteran`s Pension Use the EDW tax code for income from optional day work. You have a tax number for your main income. The code you use depends on the type and amount of your main income. You must have tax legislation in place to meet your tax obligations. Tell your employer or payer what your code is, otherwise you will be taxed at the highest non-declaration rate of 45%. In reality, the system works and calculates the tax correctly in about 90% of cases. The 10% of the time the secondary tax system does not work is when a person`s income exceeds one of the income thresholds ($14,000, $48,000 or $70,000) because of income from their second job. An example of this is when someone`s first job earns them $40,000 a year, for which they would have an M tax number. Their second job earns them $10,000 a year, for which they would have an HS tax number. The HS tax code imposes them at 30% on their income of $10,000, with their first income of $8,000 from their second job being taxed at only 17.5%.
Over the course of the year, this person will deduct the PAYE from their salary totalling $9,020, although the tax on $50,000 should actually be $8,020. So you`ll be overwhelmed by $1,000. Until the tax administration updates its computer system, the only way to get around this problem is for people to file a tax return or request a personal tax summary from the IRD or request a special tax rate from the tax administration. The whole issue of payroll, including tax codes, deductions, including student loans, KiwiSaver and child support, is a minefield and takes an enormous amount of time to manage for small businesses. Other tax laws such as CAE (Casual Agricultural Workers), WT (Schedular Payments) and the credit for self-employed individuals earning between $24,000 and $48,000 (ME tax code) all have their own rules. While payroll programs speed up the process, we`ve found that sometimes even the computer does it wrong, especially when a bonus or other large salary payment exceeds one of the income thresholds. The tax administration has a very good PAYE calculator on its website that can be useful for these situations. If we determine that you are using the wrong tax identification number, we will ask your employer or payer to change it and notify you. We do this to prevent you from being taxed more than you should during the tax year or to avoid receiving an invoice at the end of the tax year.
Talk to us if you disagree with our decision to change your tax legislation. The good news is that it is a common misconception that people pay a higher tax rate when they get a secondary tax law. New Zealand`s tax and PAY system is designed to tax employees at the correct rate. We have a progressive tax system that ensures that individuals pay a higher tax rate if they earn more. Our current tax rates for individuals are as follows: If you have a student loan, use a tax number that tells your employer to deduct your refunds. All new employees who take up employment must complete a tax form (IR330). The employee is responsible for choosing a tax code and there is an organizational chart that the IRD has created to determine the tax identification number on which an employee must appear. If a person`s annual income from all sources is likely to be less than $14,000, the secondary tax number (for their second job) is SB.
If the income is likely to be between $14,000 and $48,000, the tax number is S. If the income is to be between $48,000 and $70,000, an HS tax code will be used and if the income from all sources is greater than $70,000, a ST income tax code will be used. Income from a self-service tax code is taxed at 10.5%, for an S code the tax rate is 17.5%, for an HS code the tax is 30% and for an ST code 33%. Use the ST tax code if your employee`s annual income from ALL jobs is over NZ$70,000 and has NO student loans. If you receive a personalized tax law during the tax year, it starts on the date we approve it and ends on March 31. Example An employee with tax code K475 and a salary of £27,000 has a taxable income of £31,750 (£27,000 plus £4,750). Multiply the number in their tax code by 10 to indicate how much to add to their taxable income before calculating deductions. Use New South Wales tax laws if you are a recognised seasonal worker or if you hold a work visa as a foreign crew member of a vessel fishing in New Zealand waters. Individuals pay progressive tax rates.
This means that you pay a progressive amount based on the income you receive. W1 (week 1) and M1 (month 1) are emergency tax codes and appear at the end of an employee`s tax identification number, by . B « 577L W1 » or « 577L M1 ». Calculate your employee`s tax only on what they paid during the current payment period, not on the entire year. You need to develop your tax legislation for each source of income you receive. Joe, a designer, earns NZ$80,000 a year. But he also has a second job, where he pockets an additional NZ$6,000. Its total annual income is now NZ$86,000. He doesn`t have a student loan. .