Wages and salaries

It is generally expected that most payroll software providers should have the tax cuts built into their systems and that the reduced amount of PAYE will apply to payments of wages and salaries made on or after 31 July 2024. In a worst-case scenario, the first wage round after that date might encounter some teething issues. If you are an employer and your payroll software provider has not indicated to you that they have made changes to their software, we recommend contacting them to ensure employees are not disadvantaged.

On 22 July 2024, Inland Revenue will issue new PAYE deduction tables, which form the basis of the calculations adopted by payroll software.

Employees who utilise secondary or tailored tax codes may need to change these to reflect the new tax thresholds.

Income more generally

Because the tax cuts will take effect a third of the way into the year (hence the use of a 31 July 2024 effective date), composite tax rates will apply for the year ended 31 March 2025. These composite rates are: 

The independent earner tax credit (paid to taxpayers who do not receive any social welfare or Working for Families payments), will be available from 31 July 2024 in full ($520 per annum) to those earning between $24,000 and $66,000 per annum (and who meet other criteria), with reduced amounts available to those earning between $66,000 and $70,000 per annum.

For individuals who pay provisional tax, the standard uplift method calculation remains unchanged – but might result in overtaxation if income levels do not change for the year. Taxpayers can voluntarily pay less provisional tax, but this comes at the risk of late payment penalties and use of money interest being charged. If you are an individual who pays provisional tax and wants to consider whether it would be appropriate to pay less provisional tax this year, please contact your Baker Tilly Staples Rodway advisor.

Resident Withholding Tax (RWT) on interest

Since recipients of interest can elect the rate of RWT withheld on interest, with the intention being that the rate elected will best align with their anticipated income, no significant legislative changes are required.

Because of this, recipients of interest simply need to contact their bank if their marginal tax rate will shift because of the government’s tax cuts. Note, Inland Revenue can contact banks and require a change in the rate of RWT withheld – but this usually occurs only where a clearly inappropriate rate of RWT has been chosen.

Portfolio Investment Entities (PIE)

The thresholds for determining the applicable prescribed investor rate for PIE investments will not be changing until 1 April 2025, and therefore there will be a small number of instances where PIE investment income is "overtaxed".

Fringe Benefit Tax (FBT)

The rates for attributed fringe benefits will not be changing until 1 April 2025. However, the formula for calculating the FBT liability has been modified from “tax on all-inclusive pay less tax on cash pay” to “tax on all-inclusive pay less FBT on net cash pay”. The effect of this is that tax cuts will not be clawed back via the FBT rules.

Employer Superannuation Contribution Tax (ESCT)

ESCT thresholds will not be changing until 1 April 2025, and therefore there will be a small number of instances where employer contributions to superannuation schemes (including KiwiSaver) are "overtaxed".

FamilyBoost

FamilyBoost is a new tax credit designed to provide support for low- to middle-income working families with early childhood education (ECE) costs.

Where a household earns up to $35,000 in income for a quarter, they will be eligible for the full rebate of $975 per quarter, provided this is less than or equal to 25% of ECE costs incurred, after accounting for existing support. For each extra dollar earned over $35,000, an abatement rate of 9.75 cents per dollar will apply, with the effect that a household earning $45,000 of income or more in a quarter will not receive any of the rebate.

To claim FamilyBoost, you will require:

• A myIR login
• An IRD number for each child attending ECE
• Your bank information
• Your partner’s details
• Electronic copies of invoices from your ECE provider

A claim will need to be made every quarter. The first quarter will be 1 July 2024 to 30 September 2024, with the ability to submit a claim from 1 October 2024.

Grandparents can claim FamilyBoost provided they have an ongoing responsibility for the day-to-day care of the child.

Working for Families changes

The in-work tax credit base rate will increase from 31 July 2024. The base rate (for up to three children) will increase from $72.50 per week to $97.50 per week, while the additional child rate will remain at $15 per week.

The minimum family tax credit threshold will be increasing to $35,316 per annum (after tax) from 31 July 2024.

Other rate changes

Standard rates have also changed in recent months. Notable ones are:

Mileage rates

Inland Revenue mileage rates are now: 

Note, these rates are designed with reference to the 2023-2024 income year. This means that the reintroduction of road user charges on electric vehicles is not yet reflected in the above rates.

Tier One rates can be used for the first 14,000 kilometres of travel for the year to 31 March (this threshold includes both business and private use), while Tier Two rates are used for travel beyond the first 14,000 kilometres.

Actual costs can also be used as an alternate when claiming income tax deductions or reimbursing employees. Reputable rates such as AA rates can be used as an alternate when reimbursing employees.

Square metre rate

The updated square metre rate for the 2024 income year is $53.10 per square metre. This provides a simple alternative calculation of costs for the dual use of buildings (e.g. home office), instead of apportioning each individual item of expenditure. The rate does not include mortgage interest, rates or rent, which must continue to be apportioned.

Short-stay accommodation

The short-stay accommodation rates for the 2024 income year have been amended as follows: 

This rate can be used by providers of short-stay accommodation in their home to reduce compliance costs for taxpayers who meet the criteria. Note that taxpayers may choose not to apply this rate and can instead claim actual expenses if desired.

Household boarding service providers

Inland Revenue’s household boarding service providers rate for the 2024 income year is $231.00 (up from the $222.00 rate for 2023), as the weekly standard cost per boarder.

The rate covers standard expenses consisting of direct costs (e.g. food and household bills), cost of accommodation and the use of a motor vehicle in providing transport to the boarders. This rate provides a simple alternative calculation of deductions where taxpayers provide private boarding services in their home to no more than four boarders at any time during the income year.

Note, this can only be used for boarders. If you have flatmates in your home, then income is fully assessable, and deductions can be claimed on a share of actual costs incurred.

Childcare household service rates

Inland Revenue has published the updated childcare household service rates for the 2024 income year. The new home-based childcare rates are as follows: 

This rate is applicable to non-GST registered taxpayers who provide childcare services in their domestic accommodation. For providers who are part of a licensed service provider network, this rate cannot be applied.

If you require assistance in relation to any of these matters, Baker Tilly Staples Rodway specialists are more than happy to assist you with tax advice.