Employers are responsible for making various deductions such as PAYE, SSCWT, student loans and child support from their employees' gross wages. These are held in trust for the Crown. Inland Revenue takes a serious view if any employer does not properly deduct or pay in employees' PAYE or other deductions. Employers face penalties if they do not meet their obligations for deductions.

The information in this section applies to all employer deductions

A payment is late if it is posted or delivered to Inland Revenue after the due date.

If you send in a payment after the due date you are charged a 5% late payment penalty. A further 2% is added every month to the amount unpaid until the deductions and penalty are paid. In addition, interest is charged on outstanding amounts until paid.

If a payment is late, but the penalty is not paid, the IRD sends a separate notice showing the penalty and interest charged. This notice is not an IR 345 so do not use it for a normal PAYE payment. Use the notice as a payment slip to pay the penalty and interest.

If the due date for a payment falls on a weekend or public holiday, there will be no penalties and interest if you make the payment on the next business day.

These rules apply when you either overpay or underpay the amount due.

If you overpay the amount due Inland Revenue generally pays you interest from the day after the original due date.

If you underpay the amount due Inland Revenue charges interest on the amount that is still outstanding from the day after the original due date. Interest is charged on all balances exceeding $100 outstanding.

Rates are published on the IRD website and are based on the following

The law requires you to file your tax returns on time. If you don't file your employer monthly schedule or ACC residual claims levy statement by the due date you may have to pay a late filing penalty.

The amount of the penalty is $250 for each form. The IRD sends a statement telling you of the penalty and the due date for paying it. Late payment penalties and interest are charged on late filing penalties that are not paid by the due date.

Employers who are required to file their employer monthly schedule electronically and fail to do so in the prescribed electronic format may be charged a non-electronic filing penalty.

The penalty is the greater of $250 or $1 for each person employed at any time during the month to which the employer monthly schedule relates.

For example, if there are 500 employees listed on the schedule each month, the penalty will be $500 each month. This penalty is payable by the 5th of the following month and will attract late payment penalties and interest if unpaid.

Employers who have an exemption from filing the schedule in the prescribed format and voluntary electronic filers will not be charged a non-electronic filing penalty.

Shortfall penalties apply to any offence committed for periods starting on or after 1 April 1997. This includes failing to deduct PAYE or failing to pay PAYE deductions to Inland Revenue.

Shortfall penalties are charged on top of any normal tax. The penalty is a percentage of the tax shortfall or deficit or understatement of tax, which results from certain actions by the employer. There are five types of penalties

In addition to these penalties there could be fines charged and imprisonment of up to five years.

Disputing shortfall penalties
You may dispute a shortfall penalty, if you feel it is wrongly imposed.

Employers must deduct PAYE, SSCWT, student loan repayments or child support when required, from any payments made to employees. Failure to do this is a serious offence and can result in penalties and fines being imposed.

Anyone who knowingly fails to make deductions can be fined up to $25,000 for a first offence and $50,000 for subsequent offences. Shortfall penalties may also be charged.

Employers must pay deductions to Inland Revenue by each due date.

The money deducted does not, at any stage, belong to employers. Under no circumstances should the deductions be used for any other purpose than for payment to Inland Revenue. Inland Revenue will help employers who try to meet their obligations but will take action against employers who do not comply with the tax laws.

Failing to pay in deductions to Inland Revenue is a serious offence and can result in the employer being prosecuted. An employer who is convicted may be

The name of anyone convicted also appears in the New Zealand Gazette.

If an employer aids and abets with another person to commit an offence, the employer may be

Anyone convicted of knowingly attempting to evade their obligations can be fined up to $50,000 and imprisoned for up to five years.

The Student Loan Scheme Act 1992 requires employers to provide Inland Revenue with their employees' details, such as IRD number, name and the details of the amount deducted. Failing to provide the correct information is an offence and may result in the employer being prosecuted. If convicted, the fines are

Prejudice
It is also an offence to discriminate against an employee, or potential employee, because of an obligation to deduct student loan repayments. An employer may not

because of student loan obligations.

An employer convicted of prejudice may be fined up to $2,000 and ordered to pay compensation to the employee.

Employee privacy
The law requires you to protect your employees' privacy by not giving out any information about their child support obligations.

There are only two exceptions. These are

An employer who is convicted of violating this law can be fined up to $15,000.

Prejudice
It is also an offence for employers to discriminate against an employee or potential employee because of child support obligations. An employer may not

because of child support obligations.

An employer who is convicted of any of the above offences may be ordered by the Court to pay compensation to the employee, or to take any other action to remedy the situation.

Employers must provide Inland Revenue with their employees' start and finish details.

Failing to provide the correct details is a serious offence and can result in the employer being prosecuted and penalised.

Every employer can expect to be audited from time to time. This will involve Inland Revenue staff checking the business's PAYE records against the returns filed to make sure the returns are correctly completed.

Remember you must keep all financial records of your taxable activity for seven years. The IRD may ask you to keep your records for an additional three years when auditing or investigating you. Failure to keep adequate records is a very serious matter, and can result in a fine.

If you want to know more about audit procedures, check the booklet "Inland Revenue audits IR 297" in the IRD Online Library on the IRD website.

Voluntary disclosure
If there is any omission or error in your PAYE affairs, you have the chance to tell Inland Revenue about it. If you do this before they audit or investigate your books, they may still charge penal tax or shortfall penalties, but at a lower rate. You won't be prosecuted, and your name won't be published in the New Zealand Gazette.

FOR MORE HELP
If you'd like to know more about this process, read the IRD booklet "Putting your tax affairs right IR 282".

At Inland Revenue every effort is made to apply the tax laws fairly and correctly, but sometimes you may disagree with how they've assessed your tax. In most cases they can correct the assessment before you need to make a formal complaint. If you can't agree, there is a formal process to follow, so your rights are protected in case the matter goes to court.

Part of meeting your obligations involves filling in various forms for Inland Revenue. The information requested on these forms is collected so Inland Revenue can assess your liabilities or entitlements under the Acts administered by Inland Revenue.

The law says that you must supply the information. If you do not, you can be prosecuted and possibly fined.

Inland Revenue may also give some information about you to Work and Income NZ, Department for Courts, Department of Labour, Statistics New Zealand, Treasury, Ministry of Education and Accident Compensation Corporation, their contracted agencies, and the Australian Government.

You have the right to see almost all of the personal information held about you and to ask the IRD to correct any errors. You can ask to do this at any Inland Revenue office.