Employees need to give you a completed IR330 - Tax code declaration. 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
- KiwiSaver employee contributions
- KiwiSaver employer net contributions
- employer superannuation contribution tax (ESCT).
If we need you to deduct child support we’ll tell you how much to deduct and when to start deducting. These deductions will then need to be paid to us.
If you file your employment information electronically you can offer payroll giving to your employees. You deduct the employee's donation each payday and pass it on to the approved charity.
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.
For more protected net earnings information, download the IR335 - Employer's guide below.
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.
Child support codes
If the child support amount you deduct is different to the amount we asked for, we need to know why to make sure we update the liable parent’s account correctly. It’s important that you provide a variation code on the employment information form if one applies.
Variation code: C
If an employee stops working for you, deduct child support only from the last full pay you gave them, and from any holiday pay owed. If this code is used, we can remove the employee from your records.
Variation code: O
If none of the other variation codes can be used to explain why the child support deducted does not equal what was expected, enter 'O' as the variation code.
Variation code: A
Sometimes you may pay an employee in advance. In this case, deduct the same amount of child support as you would if you were paying the employee on the usual payday. You must include the child support with the deductions for the period when the employee was given the advance pay. Your child support will be more than usual for that period.
Variation code: D
Sometimes the full amount of child support requested from an employee's wages may not be deducted because you made an advance payment. Your child support will be less than usual for that period.
Variation code: P
If you're unable to deduct the full amount of child support requested from an employee's wages due to protected net earnings.
Variation code: S
If an employee is off work on unpaid leave for a short period of time and you're unable to deduct any or all the child support requested.
Employers and employees can work out how much PAYE should be withheld from wages.Go to this tool