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  • Obligations of employers

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    Withholding from salaries and wages

    New Zealand

    Australia

    As an employer, you must:

    • make the correct pay as you earn (PAYE) deductions from your employees' earnings using the appropriate tax code, and
    • meet your filing and payment obligations for PAYE and its related tax types, such as    
      • student loan deductions, and
      • KiwiSaver contribution deductions.
       

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    If you make payments from which withholding is required – for example, wages to employees or payments to businesses that do not quote an ABN – you must register for pay as you go (PAYG) withholding before you first withhold.

    Withholding tax from independent contractors

    New Zealand

    Australia

    Tax is deducted from schedular payments (formerly withholding payments) made to people who are not employees but work for you on a contract-for-service basis.

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    Payments made to your independent contractors generally do not require withholding.

    However withholding may apply if:

    • the independent contractors have not quoted their ABN
    • the payments are part of labour hire arrangements
    • the foreign resident withholding provisions apply, or
    • they have entered into a voluntary withholding agreement with you.
     

    Foreign resident withholding

    New Zealand

    Australia

    If you are paying interest, dividends or royalties to people who are not New Zealand residents, you need to deduct non-resident withholding tax (NRWT) from the gross amount paid.

    This amount is non-resident passive (formerly withholding) income (NRPI, formerly NRWI). If you pay NRPI, you will need to register as an NRWT payer.

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    Foreign resident withholding (FRW) is part of PAYG withholding system. You will need to withhold an amount from payments made to foreign residents for particular types of activities. Some of these activities are:

    The rate of withholding is set at a default rate. We can vary this rate to match the expected tax payable in particular cases.

    An annual income tax return should be lodged by the foreign resident and the FRW amounts withheld are a credit against the tax assessed.

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    Fringe benefits tax (FBT)

    New Zealand

    Australia

    Most benefits given to employees other than their salary or wages are fringe benefits.

    There are four main groups of taxable fringe benefits:

    • motor vehicles available for private use
    • free, subsidised or discounted goods and services
    • low-interest loans
    • employer contributions to sick, accident or death benefit funds, specified insurance policies and non-monetary contributions to superannuation schemes.

    If these benefits are enjoyed or received by employees as a result of their employment, including those benefits provided through someone other than an employer, the benefits are liable for FBT.

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    Fringe benefits tax (FBT) is a tax payable by employers who provide non-cash benefits to their employees (or their associates) as a result of their employment. A fringe benefit may be provided by another person on behalf of the employer.

    The amount of FBT payable depends on the class of benefit provided (as examples, car, car parking, loan, expense payment). There are rules for working out the taxable value for each class of benefit. . The amount of tax payable is broadly equivalent to the amount of tax that the employee would have paid at the highest individual marginal tax rate if they had paid for the benefit with their salary, after payment of tax.

    The FBT year is the 12 months beginning 1 April and ending 31 March.

    The rate of FBT may vary from year to year, but the ATO will advise you of the rate each year. The rate for the FBT year ending 31 March 2017 is 49%.

    In some cases, where a fringe benefit could be taxed in both Australia and New Zealand, Article 15 of The DTAExternal Link will have the effect that it will only be liable to FBT in one country.

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    Superannuation

    New Zealand

    Australia

    Any contribution an employer makes to a super fund for the benefit of an employee is liable for tax.

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    The super guarantee legislation requires employers to provide a minimum level of super support for their employees. If you are not a resident of Australia but employ workers on a full-time, part-time or casual basis, contractors wholly or principally for labour, or company directors, you are still required to provide super for work performed in Australia.

    The super you provide must be paid to a complying Australian super provider.

    You should provide each eligible employee with super contributions at the applicable super guarantee rate. The current SG rate is 9.5% of ordinary time earnings (OTE). OTE is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments.

    Contributions you make for your employees to a complying Australian super fund are generally tax deductible provided certain conditions are met.

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    Student loan deductions

    New Zealand

    Australia

    Some employees may need to make repayments to us for a student loan.

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    You may need to withhold tax from your employees who have HELP/SSL/TSL student loans.

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    Child support deductions

    New Zealand

    Australia

    Some employees may need to make repayments to us for child support. When this occurs, we will often request the employer to deduct this from an employee's wages and pass these deductions to us.

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    Sometimes employers are required to automatically deduct child support payments from your salary or wage or contract payment under the Child Support Scheme.

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      Last modified: 16 Feb 2017QC 27171