A New Zealand accountant believes that small business owners in the country will lose a not-so-insignificant amount of their profits in order to meet the new payday requirements that’ll come into effect by April 1.
By that day, all employers in New Zealand will have to pay details to the IRD within two days of them paying an employee, which is a notable change from the monthly employer schedule that typically has most business filing the information on the 20th in the following month. These changes are designed to make it easier for the IRD to ensure that payments are accurate, as well as to enable automatic tax refunds, though it might take some adjustment for small businesses and their payroll outsourcing service of choice.
According to David Harrison, a chartered accountant based in Kerikeri, these changes would be an extra burden for small Kiwi businesses, and could cut into a big chunk of their profits. He believes that payday filing won’t be less work, and that it will cost about an extra $2,000 in annual fees to change to pay day filing.
Harrison says that that number was based on the fact that it takes about 20 minutes to calculate and enter gross wages, student allowances, KiwiSave and child support deductions for every company employee every month. He states that if this has to be done 4 times every month instead of just once, there will be an average with an extra hour monthly, which means that a conservative charge out rate of $150/hour would see about $1,800+ annually added onto client accounts.
Those who use a payroll outsourcing service could see additional $65 every month adding about $800 in costs while also needing to enter the information into their software programme. A lot of people, he adds, will consider how to fill PAYE information to the IRD.
Jolayne Trim, Senior Tax Advocate for Chartered Accountants Australia and New Zealand, stated that $2,000 is an accurate metric, particularly for those that manually handle matters or use payroll outsourcing service not connected to the IRD and paying employees every week, with higher costs expected from some small businesses.
She believes that using a payroll software would cut down on compliance costs, but the best thing right now is for the government to not only support and encouragement, but also giving incentive for businesses to move to the new system.