Is Your Payroll System Prepared for New Zealand’s 2024 Income Tax Changes?

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Is Your Payroll System Prepared for New Zealand’s 2024 Income Tax Changes?

The 2024 Budget introduced significant changes to personal income tax (PIT) brackets, affecting payroll systems throughout New Zealand. As of 31 July 2024, these adjustments have increased the take-home pay for approximately 1.9 million households by about $60 every fortnight.

It is essential for businesses to update their payroll systems promptly to accommodate the new tax rates. This article provides a detailed walkthrough of the adjustments and ensured your payroll system was equipped to implement them effectively.

Overview of the 2024 Income Tax Bracket Changes

Effective from 31 July 2024, the new income tax thresholds have been set at $15,600, $53,500, and $78,100 annually.

These changes mean that employees will retain a higher percentage of their earnings, but they also require businesses to adjust their payroll configurations to accurately process payments under the new brackets.

Key Updates to Income Tax Brackets

Current brackets

$0 – $14,000 – 10.5%
$14,001 – $48,000 – 17.5%
$48,001 – $70,000 – 30%
$70,001 – $180,000 – 33%
$180,001+ – 39%

New brackets

$0 – $15,600 – 10.5%
$15,601 – $53,500 – 17.5%
$53,501 – $78,100 – 30%
$78,101 – $180,000 – 33%
$180,001+ No change, 39%

These adjustments affect four of the five existing income tax brackets, necessitating updates to payroll systems to ensure compliance and correct tax withholding.

Ensuring Your Payroll System is Compliant

For businesses using major payroll software platforms like Xero Payroll, PayHero, or PaySauce, the update to incorporate these new PIT brackets should be automatic. However, it’s essential to confirm with your software provider that these updates have been implemented and that the new brackets are being used in calculations.

If your business manages payroll manually, you’ll need to adjust your calculation tables and formulas to reflect the new thresholds. Ensuring accuracy in these updates is critical to prevent payroll errors and potential compliance issues.

Streamlining Your Payroll Process

Keeping your payroll system updated can be a complex task, especially with significant tax changes. If you find managing your payroll internally overwhelming, consider outsourcing to a payroll services provider. Outsourcing can reduce the administrative burden, minimise errors, and ensure compliance with the latest tax laws.

Our accounting firm offers comprehensive outsourced payroll services, handling every aspect from accounting software setup and training and maintenance, allowing you to focus on growing your business without the added stress of payroll complexities.

Next Steps

The changes to the income tax brackets represent a shift towards increasing employee take-home pay, which can have a positive impact on morale and financial stability. Ensuring your payroll system is prepared for these changes is not just about compliance; it’s about taking proactive steps to support your team effectively.

For more information on adapting your payroll system or to explore outsourcing options, contact our expert team today. We are here to help ensure that your payroll operations are smooth, compliant, and beneficial for both your business and your employees.

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