Created: August 23, 2013 at 3:12 PM | Updated: September 3, 2020 | By Community Resource Kit
Managing tax matters can be complicated and will be quite specific to different types of organisations.
This section provides some basic tips on managing your tax responsibilities, but we strongly advise you to talk to an accountant or refer to the detailed information for non-profit organisations, available from Inland Revenue's website: https://www.ird.govt.nz/
Here are some of the basic tax responsibilities most organisations or groups will have:
Tip: The New Zealand tax system relies on people meeting their tax responsibilities voluntarily but there are penalties if you don't comply. Check out Inland Revenue for more information.
Your IRD number is used for all your organisation's tax and business. You'll need an IRD number to register as an employer. You can find information about getting an IRD number here - https://www.ird.govt.nz/activities/apply-for-a-business-ird-number - and start the application process online.
Tip: Contact Inland Revenue on freephone 0800 377 774 if you need further help. Once you've been issued with an IRD number, you use it in all your dealings with Inland Revenue.
The following community organisations are liable for income tax on their taxable income:
Tip: The correct tax return form to use depends on your type of organisation. Refer to Inland Revenue - https://www.ird.govt.nz/income-tax-for-non-profits-and-charities - for the correct forms for your organisation. Note: most community groups that need to complete an income tax return will use an IR9 return (for clubs and societies).
There are a number of income tax exemptions that an organisation may be entitled to. To qualify, the organisation must meet the specific requirements of the particular exemption it is claiming.
The following organisations are allowed tax exemptions under income tax law:
Unless a group gains an exemption from Inland Revenue, it may be liable for income tax on its earnings (i.e. the profit it makes). As mentioned previously, deduction of up to $1000 per year from an organisation's net income is available for some non-profit groups, which reduces the amount of tax they need to pay.
Tip: For more information on the various tax exemptions available to different types of organisations refer to IR255 - Charitable organisations: a tax guide for charities, donee organisations and other groups, available from Inland Revenue's website (www.ird.govt.nz) or by calling them on 0800 377 774.
Money held in the bank or a financial institution is taxed on the interest it earns before payment. An organisation that is exempt from income tax is generally eligible for a certificate of exemption from RWT.
You need to complete an Application for exemption from resident withholding tax on interest and dividends (IR451) form and send it to Inland Revenue in order to obtain a certificate of exemption.
Tip: You can take a copy of your exemption certificate to the bank to make sure that they don't deduct tax. If RWT has been incorrectly deducted, then you can apply for a refund on an IR454 Resident Withholding Tax (Refund Request) form.
As soon as you start employing people, you must register with Inland Revenue. If you know in advance that someone will start working for you, you can register before they actually begin work.
Tip: To register as an employer, you can register online at: https://www.ird.govt.nz/employing-staff/register-as-an-employer You can also fill in the Employer registration (IR334) form and send it to one of the addresses listed on that form (go to the bottom of the webpage and use the dropdown Other ways to do this to locate the form).
As an employer, you must make deductions from payments you make to people who work for you, and pay these deductions to Inland Revenue. The types of deductions you may need to make are:
Tip: You can get a more detailed overview of employers responsibilities here: https://www.ird.govt.nz/payroll-employers/become-employer/overview/
The following sections cover the various types of deductions from salaries and wages. More information can be found here: https://www.ird.govt.nz/employing-staff/deductions-from-income
PAYE (pay as you earn) is the basic tax you take out of your employees wages whenever you pay them. PAYE includes the Accident Compensation Corporation (ACC) earners levy.
Your employees must complete a tax code declaration (IR330) form as soon as they start work for you. This form explains how to work out the correct tax code. The amount of PAYE you deduct depends on this tax code. Inland Revenue can provide you with a copy of the tax tables so you can work out the amount of PAYE to deduct for each tax code.
Here are the 1 April 2020 until 31 March 2021 tables:
If the net pay is to be the same every pay period, you can obtain an authority from your organisation's bank and make a direct credit into the employee's account.
Each month, Inland Revenue requires you to fill out an employer monthly schedule.
As an employer, you can use payday filing to enter PAYE deductions, student loan, child support, KiwiSaver and ESCT (employer superannuation cash contribution) deductions for all your employees.
Alternatively, you can download an IR348 enter the details (as above) and send the form to IRD.
For more information, see: https://www.ird.govt.nz/employing-staff/deductions-from-income
There are penalties if an employer does not meet its obligations regarding deductions and payments. Read more here - https://www.ird.govt.nz/managing-my-tax/penalties-and-interest/penalties-and-debt/late-payment-penalties
Your monthly employer information, along with a payment covering the monthly PAYE deductions, must reach Inland Revenue before the 20th of each month.
If your PAYE deductions are more than $500,000 a year, you are considered to be a large employer and must pay your PAYE deductions twice a month (or choose to pay more often than this). If this applies to you, contact Inland Revenue for more information or see more information here: https://www.ird.govt.nz/employing-staff/payday-filing/paying-deductions-to-inland-revenue
Tip: Remember you incur fees for late filing of PAYE returns. Even if you have a nil monthly schedule, you still need to file it on time (i.e. by the 20th of the month following wage payment).
Some of your employees may need to make repayments to Inland Revenue for a student loan. They will use a student loan tax code on their tax code declaration (IR330) form. The PAYE deduction tables also show the amount of student loan repayment to deduct as well as the amount of PAYE, based on your employees tax code.
Tip: If you are required to make child support deductions for an employee, Inland Revenue Child Support will send you a child support deduction notice telling you how much to deduct. Visit: https://www.ird.govt.nz/childsupport/ for more details.
Fringe benefit tax is payable on any fringe (i.e. non-cash) benefits provided by the employer to the employee e.g. motor vehicles, low-interest loans, etc.
Charitable organisations that are exempt from paying income tax, may also be exempt from paying FBT on any benefits provided to employees while they are carrying out the organisation's charitable activities. For example, if an employee has the use of a car while carrying out charitable work for the organisation, any private benefit arising is not subject to FBT. However, if the organisation provides a car as part of a salary package or for use with its business activities, FBT must be charged on any private benefit.
Some benefits that are liable for FBT are:
Tip: You may also be eligible for other exemptions from paying FBT. Refer to the publication IR255 Charitable organisations: a tax guide for charities, donee organisations and other groups.
KiwiSaver is a voluntary, work-based savings initiative to help individuals save for their retirement. As an employer, you will play an important role in helping your employees save with KiwiSaver. KiwiSaver has been designed to use your existing payroll process, and minimise any extra work for you - read more here: https://www.ird.govt.nz/kiwisaver/kiwisaver-employers
Your main roles in KiwiSaver are to:
Tip: For further information, visit: https://www.ird.govt.nz/kiwisaver or https://www.ird.govt.nz/kiwisaver/kiwisaver-employers
Payroll giving is a scheme that gives employees the opportunity to donate to an approved donee organisation direct from their pay and receive an immediate tax credit for payroll donations. If you're an employer and file your IR348 and IR345 electronically using ir-File, you can choose to offer payroll giving to your employees. You'll need to:
Tip: For further information, visit: https://www.ird.govt.nz/employing-staff/deductions-from-income/payroll-giving
GST is a tax on consumption of most goods and services in New Zealand. GST is currently charged at 15% of the value of the goods or services provided. It is a separate tax from income tax.
A taxable activity is any activity carried on continuously or regularly by a business, trade, manufacturer, professional person, association or club. It includes any activity that supplies, or intends to supply, goods and services to someone else for a consideration (e.g. money, compensation, reward), but not necessarily for profit.
Taxable activities do not include:
If an organisation's annual income for taxable activities was over $60,000 for the past 12 months or expects to be in the next 12 months, it must register for GST. The organisation must also register if your prices include GST. As soon as either of these apply to your organisation, you must register for GST within 21 days.
If your income is less than $60,000, you can choose to register, although IRD does not encourage this. For some voluntary organisations being registered will be an advantage because you will be able to claim back the GST you have paid on goods and services the organisation has used. However, you should remember that if you decide to cancel your registration, you will have to pay GST on the assessed value of your assets at the time of cancellation.
You can read more here: https://www.ird.govt.nz/gst/gst-registering/register-who/
A non-profit body can apply in writing to IRD to treat each branch and division separately for GST purposes. However, each branch or division must maintain its own accounting system and:
Branches and divisions with a turnover of:
You can register for GST by completing a GST Registration form online. GST registration can be done online through Inland Revenue's website - https://www.ird.govt.nz/gst/registering-for-gst
To complete your registration you will need:
After you complete the online registration, you'll receive immediate confirmation of your:
Tip: Make sure that your GST periods are in line with your year end balance date e.g. if you have a June balance date, ensure that one of your GST periods ends in June. Read more about GST filing frequency here: https://www.ird.govt.nz/gst/registering-for-gst/choosing-your-gst-filing-frequency
When you are registered for GST you will need to:
It is very important that you are aware of what you need to do as a GST-registered organisation, there are hefty penalties if you don't comply with the regulations. In general, all organisations registered for GST must:
Organisations registered for GST should note that:
If you're GST-registered and have a myIR account, paper returns won't be mailed to you. IRD will send you an email to let you know when your GST return is due.
NOTE: You can't get an extension of time to file a GST return, so it's important to know when your GST returns are due.
You may be able to file your GST return directly to IRD through your accounting software. The benefits of filing through accounting software include:
Some useful basic tips on calculating GST are:
Keep in mind that you must still send your GST return to Inland Revenue even if it's a nil one (i.e. there is no refund owing or tax to pay) otherwise Inland Revenue will produce a default assessment based on previous returns and charge you accordingly.
Tip: To find out details on how to calculate your GST (in order to complete your GST return) and how to pay GST or receive a GST refund, visit: https://www.ird.govt.nz/gst/work-out/working-out-your-gst/
Alternatively you can contact Inland Revenue's business tax information service on free phone 0800 377 774.
Employers are required to pay ACC to cover work-related accidents on behalf of their employees. The levy is based on the organisation's gross wages paid multiplied by the industry rate. When you file a tax return, Inland Revenue passes on your details to ACC so they can invoice your organisation for levies. If you are an employer and have not received an invoice from the ACC, you will need to contact ACC directly.
Tip: Ensure you check the gross wages used by the ACC in their calculations and remember there is GST charged on all ACC employers levies.
In addition to ACC employers levies, all employees must pay an ACC earners levy to cover the cost of non-work-related injuries. Inland Revenue collects this on behalf of the Accident Compensation Corporation.
For employees, this levy has been built into the PAYE tables and is deducted along with their PAYE. This means that no extra calculations are needed for it in each pay period.
Tip: For further information on ACC earners levy, visit: https://www.acc.co.nz/for-business/ or https://www.acc.co.nz/for-business/paying-levies/?smooth-scroll=content-after-navs or contact ACC on free phone 0800 222 776.