1st April 2025 Upcoming Changes
Is your system compliant with the latest changes effective 1st April?
Update on ESCT rates – new thresholds
Following on from the change in tax thresholds that came into effect on 31 July 2024, there is a further change to the tax thresholds for ESCT rates for employers’ Kiwisaver contributions as at 1st April. It is always recommended to review ESCT rates once a year after 1 April, but this is more important this year due to the tax threshold changes.
Action: Does your payroll system have a method for determining the ESCT rate for employees and what is the process?
Taxation of extra pay when employment ends
From 1 April new rules will be in place for extra pay on termination. The annualised amount will now be based on the PAYE income for the last two paid pay periods prior to the termination pay. If an employee is weekly paid, then the annualised amount will be calculated on the last two paid weeks times by 26 to get the annual income. Fortnightly paid will be based on the last two fortnights pay periods times by 13 and monthly paid will be based on the last two monthly pays times by 6 to get the annual income. The last two pay periods are the periods on which the employee received regular payments and excludes out of cycle payments made in between. The calculation also excludes any extra pay made in the regular pay period.
Action: Has the software provider updated the system to accommodate this new taxation rule?
1 April Min wage change
On 1 April 2025, the minimum wage will increase from $23.15 to $23.50, an increase of 35c. While this year’s increase is less than in previous years, it’s important to check employees’ rates and increase where the minimum wage is applicable. Be careful of the calculation of piece work where the average rate may fall below $23.50.
Action: Review and update any pay rates for employees on minimum wage. As this is legislated, there is no requirement to notify the employee although it is best practice.
ACC earner levy
Apart from a period from 1 April 2020 to 31 March 2022, ACC levies increase each year. ACC levies are included in the employees’ tax take each pay run and is not easily identified as the tax take is one amount encompassing both the PAYE and Earner’s Levy. This year the ACC levy is increasing from $1.60 per $100to $1.67 per $100. While the increase is small, there are some employees who notice the increase in tax and thus the reduction in net pay and may query it so it pays to have this in mind when processing the first pay run paid after 1 April.
Action: Review any release notes from software provider and spot check a few employees in the first pay run paid in April to ensure this has been updated.
Is your system compliant with the latest changes effective 1st April?
Update on ESCT rates – new thresholds
Following on from the change in tax thresholds that came into effect on 31 July 2024, there is a further change to the tax thresholds for ESCT rates for employers’ Kiwisaver contributions as at 1st April. It is always recommended to review ESCT rates once a year after 1 April, but this is more important this year due to the tax threshold changes.
Action: Does your payroll system have a method for determining the ESCT rate for employees and what is the process?
Taxation of extra pay when employment ends
From 1 April new rules will be in place for extra pay on termination. The annualised amount will now be based on the PAYE income for the last two paid pay periods prior to the termination pay. If an employee is weekly paid, then the annualised amount will be calculated on the last two paid weeks times by 26 to get the annual income. Fortnightly paid will be based on the last two fortnights pay periods times by 13 and monthly paid will be based on the last two monthly pays times by 6 to get the annual income. The last two pay periods are the periods on which the employee received regular payments and excludes out of cycle payments made in between. The calculation also excludes any extra pay made in the regular pay period.
Action: Has the software provider updated the system to accommodate this new taxation rule?
1 April Min wage change
On 1 April 2025, the minimum wage will increase from $23.15 to $23.50, an increase of 35c. While this year’s increase is less than in previous years, it’s important to check employees’ rates and increase where the minimum wage is applicable. Be careful of the calculation of piece work where the average rate may fall below $23.50.
Action: Review and update any pay rates for employees on minimum wage. As this is legislated, there is no requirement to notify the employee although it is best practice.
ACC earner levy
Apart from a period from 1 April 2020 to 31 March 2022, ACC levies increase each year. ACC levies are included in the employees’ tax take each pay run and is not easily identified as the tax take is one amount encompassing both the PAYE and Earner’s Levy. This year the ACC levy is increasing from $1.60 per $100to $1.67 per $100. While the increase is small, there are some employees who notice the increase in tax and thus the reduction in net pay and may query it so it pays to have this in mind when processing the first pay run paid after 1 April.
Action: Review any release notes from software provider and spot check a few employees in the first pay run paid in April to ensure this has been updated.