5 Important changes that SME's need to aware of for the new financial year

There are always a number of changes that are implemented by the Government at the beginning of the financial year and this year is no different. Here are five critical changes that come into effect on 1 April 2019 which you should be aware of:

Payday Filing

From 1 April 2019 Payday Filing becomes compulsory for all employers. Under Payday Filing you will undertake the following:

  • Submit your payroll information within 2 working days of the payday;

  • Provide employee details for new and departing employees, including their start and end date, contact details and date of birth, before the employee is paid for the first time;

  • File your returns electronically; and

  • Have the ability to correct your employment information online.

Once you have started filing Payday returns you will no longer be required to file the monthly IR345 Employer Deductions and IR348 Employer Monthly Schedule Returns with the IRD. The due date for payment of your payroll deductions will still be the 20th of the month following the deduction (unless you are a large employer).

All payroll software providers are in the process of rolling out this functionality to their users. Xero Payroll will start rolling this functionality out in the week beginning 18 March 2019 but there are some things that you can do to get prepared. We will be touching base with all Xero Payroll clients to ensure that you are aware of what needs to be done prior to Payday filing going live.

If Thrive CA files your PAYE return for you, we will be in touch to let you know how this process is going to change with the implementation of PayDay Filing.

Minimum Wage Increase

The Labour / NZ First Government committed to increasing the adult minimum wage to what they considered to be a "living wage" rate of $20 per hour by 1 April 2021.  As a result, we will see hefty increases to the minimum wage level over the next two years.  

From 1 April 2019, the adult minimum wage increases from $16.50 per hour to $17.70 an hour.  That's right, we have an increase of $1.20 in the minimum wage coming into effect on 1 April 2019 and for each of the next two years the increase will be at the same level.

The starting-out and training minimum wage rates will increase from $13.20 to $14.16 per hour – remaining at 80 per cent of the adult minimum wage.

Please ensure that you review what you are paying all employee's and ensure that you comply with this increase to the minimum wage with effect from 1 April 2019.

The Government has also set indicative rates of $18.90 from 1 April 2020 and to $20 from 1 April 2021. These rates will be subject to an annual review each year prior to being confirmed.

Auto Tax Refunds

The IRD's transformation program is in full swing and there is a bunch of new functionality being rolled out in April 2019.  One of the areas that is impacted by the transformation program this year is that salary and wage earners will not be required to complete and file a personal tax summary (PTS) to receive a refund.  Instead, the IRD will automatically calculate the tax position of all salary and wage earners and if you are entitled to a refund it will be automatically released to your bank account.

“Put simply, IRD will now look at the information we have about an individual and if we’re confident we have all their information, we’ll calculate and finalise their tax position for the year and generate an automatic refund - so there’s no need for a PTS, making it a very simple process for wage and salary earners.”
— Inland Revenue Commissioner Naomi Ferguson

To ensure that this system works effectively, it is critical that the personal information that the IRD holds for you is correct - bank account number, contact details etc. If you think that the IRD may have incorrect contact information for you, please ensure that you get in touch with them to update your personal information.

Ring Fencing of RENTAL Losses

You may recall that when the Government was first elected they announced their intention to have losses from rental activities ring fenced as a means to making the tax system fairer while improving housing affordability for owner occupiers.

The bill which includes these changes is set for it’s second reading before parliament in the immediate future and it appears that there will be no stopping it’s implementation with effect from 1 April 2019.

This will mean that investors will no longer be able to offset tax losses from residential rental activities against other income, such as salaries or wages, to reduce their tax liability. Effectively, these losses will now be ring fenced and can only be used against future residential rental income or taxable income on the sale of residential land. Investors can no longer expect a refund as a result of the losses that you have incurred on your rental property investment.

Trustee Act Rewrite - Update

Late in 2018, the Justice Committee reported back on the Trusts Bill and recommended that the bill be passed with some amendments. The bill is now sitting in the queue for it’s second reading.

As we have indicated previously, this bill makes substantial changes to Trust law and significantly changes the requirements for Trustees. Once we know what the final form of the act is going to be we will work with all our trust clients to ensure that your trust continues to work for you and to ensure that your obligations under the act are met.

The good news is that the bill will not apply until 18 months after the date it receives Royal Assent so we have a reasonable amount of time to ensure that we adapt to the new requirements.