Payroll taxes in New Zealand: An employer’s guide

When you hire in New Zealand, you — as the employer — are responsible for calculating, withholding, and submitting payroll taxes from your team members’ pay slips. For some taxes, you are also required to make employer contributions.

In this article, we’ll explain clearly which taxes you need to withhold, which taxes you need to contribute to, and how to remit and make payments. So let’s jump straight in.

What is payroll tax?

Payroll taxes are the contributions employees and businesses make to the government to fund public programs, such as retirement, healthcare, and unemployment insurance. They typically include income tax and social contributions, and are set at pre-determined rates.

These rates (and the rules governing them) vary by country, but it’s every employer’s responsibility to ensure they are compliant, and that they are withholding and submitting the correct amounts.

What is the difference between payroll taxes and corporate taxes?

Generally, payroll taxes are tied to your employees’ wages, while corporate taxes are based on your company’s profits. 

Which payroll taxes do you need to withhold from your employee in New Zealand?

In New Zealand, the main taxes you’ll need to withhold are:

Pay As You Earn (PAYE, or income tax)

New Zealand residents are taxed at the national level, as follows:

You must withhold the correct amount from your employees’ pay slips based on these rates.

When to pay: If your company’s total annual PAYE and Employer Superannuation Contribution Tax contributions (see below) are NZ$50,000 or less, you must make payments monthly. Otherwise, you must make twice-monthly payments.

Accident Compensation Corporation (ACC) earners' levy

This levy funds New Zealand's accident insurance scheme. You must deduct the earners' levy from your employees' earnings up to a specified maximum.

When to pay: Payments for employee contributions should be made at the same time as your PAYE payments (see previous section).

You may also be required to withhold additional taxes for certain employees, such as child support payments, student loan repayments, or any other court-ordered garnishments.

If your employee is enrolled in the KiwiSaver retirement savings program, you will also need to withhold their contribution (this is typically between 3% and 10% of their gross earnings).

Which payroll taxes does your business need to contribute to?

As well as withholding the taxes and contributions listed above, you are also required to make your own contributions, as follows:

Employer Superannuation Contribution Tax (ESCT)

Employer contributions to superannuation schemes, including KiwiSaver, are subject to ESCT. The rate of ESCT depends on your employee's income and is deducted from your contribution before it's paid into the employee's superannuation fund.

When to pay: At the same time as your employee PAYE payments.

KiwiSaver contributions

If your employee has opted into the KiwiSaver program, you must contribute a minimum of 3% of their gross salary or wages.

When to pay: At the same time as your employee PAYE payments.

ACC levy

Employers are also required to contribute to the ACC levy. The amount varies based on your industry and your claims history.

When to pay: Employers receive an invoice from ACC annually for work-related injury cover. Payment is due by the date specified on the invoice, typically within 30 days of receipt.

Note that, if you provide fringe benefits to your employees in New Zealand — such as a company car — you may be liable to pay fringe benefits tax (FBT). You can opt to pay this tax quarterly or annually.

To quickly see a full breakdown of payroll taxes and employment costs for your New Zealand hire(s) based on their salary, use our free Employee Cost Calculator tool.

How do you remit and pay payroll taxes in New Zealand?

To remit and pay employer and employee taxes and contributions, you will need to:

1. Ensure you are registered as an employer with the Inland Revenue, and set up an account on the MyIR portal.

2. Calculate the correct amounts for withholding, and then add your employer contributions. If you use Remote Payroll or Remote EOR, we will do this for you.

3. Ensure that you adhere to the payment deadlines detailed above.

4. Make the payments through MyIR. You can also make the payment by bank transfer.

How do you manage payroll taxes as an international employer?

When you hire a New Zealand-based team member from abroad, there are several ways you can manage their payroll and payroll taxes.

If you already have your own legal entity in New Zealand, you can:

• Handle it in-house. You can hire your own payroll tax specialists and manage everything internally. This can be costly, however.

• Use a local third party. You can hire a local firm to handle payroll, although this can be unreliable, costly, and pose data risks.

• Use a PEO. A professional employment organization (PEO) acts as an outsourced HR provider, and includes payroll.

• Use a global payroll provider. Global payroll providers — like Remote — have local specialists in multiple countries, ensuring that you are fully compliant with all tax requirements in each one. This is especially convenient if you have (or plan to have) employees in different countries, as you can manage all of them through one platform.

If you don’t have your own entity in New Zealand and you still want to hire there, you can:

• Set up your own entity. This can be extremely costly and time-consuming, but if you plan on establishing your business long-term in New Zealand, it might be a viable approach. To pay your employees, you would then need to choose one of the options above.

• Use an EOR. Employer of record (EOR) providers — like Remote — enable you to quickly and easily hire anywhere in the world, and also handle all the core HR functions (such as compliance and payroll). As well as being generally more cost-effective than opening your own entity, this option is highly scalable and, again, enables you to streamline all your global HR tasks in one place. How does an EOR work?

Global HR —

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EOR, Payroll, or both: What does your business need?

Understand the difference between EOR and payroll services — and clarify which one your business needs to pay your international team members.

What about independent contractors?

In New Zealand, independent contractors are classified differently to employees. As a result, they (in most cases) are responsible for calculating, managing, and paying their own taxes.

However, it’s crucial to understand the difference between contractors and employees, as you may inadvertently create misclassification risk. This can result in severe fines and penalties for your business. Learn more about hiring contractors in New Zealand.

How can Remote help?

Knowing which payroll taxes you need to calculate, withhold, and contribute to requires local expertise, especially as these rules can — and do — change. And if you make a mistake or fail to comply, the financial consequences can be significant.

Whether you have your own entity in New Zealand or not, Remote ensures that you are withholding and contributing the correct amounts, and that you are fully compliant at all times with local tax and employment laws. We also provide 24/7 support for any guidance you may need.

To see how we can help — and to learn which approach is the most suitable for your business — speak to one of our friendly payroll experts today.

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