Employees need to give you a completed Tax code declaration - IR330. The tax code your employee uses will depend on the work type and their situation.
If your employee does not give you a completed IR330 you need to deduct PAYE at the 45% non-notified rate.
If we notice that one of your employees is using the wrong tax code we'll write to you. This letter will tell you what their code should be. You'll need to start using the correct code and deduct tax based on that code.
When you pay an employee their salary or wages you will need to make deductions for:
- child support
- student loan repayments
- employer superannuation contribution withholding tax (ESCT)
- KiwiSaver employee contributions
- KiwiSaver employer net contributions.
These deductions will then need to be paid to us.
The way you do this depends on how much PAYE you deduct.
Child support and protected net earnings
If you’re deducting child support from an employee’s pay, the maximum amount of child support you can deduct is 40% of their net earnings (after tax). This is called ‘protected net earnings’. Protected net earnings are usually only affected if you’re paying an employee less than their usual pay – for example, if they take unpaid leave.
Protected net earnings only apply to child support. Other deductions should still be made even if these add up to more than 40% of their pay.
If the child support deduction we’ve asked you to make is more than 40% of your employee’s net pay, you should only deduct 40% of their net pay amount. We will arrange with your employee to pay the balance, so you do not need to make up the missing amount in future pays.