New Zealand Payroll Practitioners Association READ & DELETE BEFORE USING If replacing the pattern/photo on this slide, first, click on and delete the pattern/photo. Then, click on the icon in the placeholder to select a new image. Size and crop if/as needed. Final image is 7.5”/190.5mm tall x 5”/127mm wide. Use images from our library. New Zealand Payroll Practitioners Association Payroll trends and insights presentation October 2019

1 Assurance Providing trust, confidence and insights through data

Payroll trust, confidence and insights Talk about impacts on the above slide

Payroll trust, confidence and insights Talk about impacts on the above slide

Payroll trust, confidence and insights Talk about impacts on the above slide

Payroll trust, confidence and insights Talk about impacts on the above slide

Payroll trust, confidence and insights Talk about impacts on the above slide

Payroll trust, confidence and insights Talk about impacts on the above slide

2 Tax Common payroll challenges

The importance of payroll Talk about impacts on the above slide

Why is PAYE important? Finance Payroll HR Strong compliance requires communication between Finance, HR and Payroll. Inland Revenue does care Are things in the right ‘bucket’? Social policy flow on Talk about impacts on the above slide

Communication breakdown Employees expect to receive the total amount they paid in the hand Example: $50 reimbursement for wellness Employee earns $75,000, on M SL code Not a KiwiSaver member What is the amount of the gross reimbursement? Options are: $74.63 $76.21 $93.27 What about KiwiSaver? Holiday pay? Talk about impacts on the above slide

Allowances/ reimbursements - Taxable vs non-taxable Overarching principle – s CW 17 of the Income Tax Act 2007 Allowances/reimbursements will be tax-free when the expenditure is expenditure for which the employee would be allowed a deduction if they incurred the expenditure and the employment limitation did not exist. Specific exemptions Relocation – CW 17B Overtime meals – CW 17C Certain work-related meals – CW 17CB Distinctive work clothing – CW 17CC Additional transport costs – CW 18 Short term visits – CW 19 Accommodation Some of the main areas where we are identifying errors are: Allowances incorrectly being treated as tax-free when they are taxable An allowance having no correlation to an actual or reasonable reimbursement Failure to understand when specific exemptions may or may not be in point Provision of accommodation and not appreciating the peculiarities with the exemptions that exist: Out of town secondments and projects – CW 16B Conferences and overnight stays – CW 16D Multiple workplaces – CW 16F Relocation – CW 17B Valuation issues – IR produced paper on this for domestic but not international Usual suspects of: S123 payments not meeting IR interpretation of a genuine S123 payment, Employee-contractor distinction Failing to account for withholding tax System flags not correctly set for ordinary – v –extra pay, superannuation flags incorrectly set

Recent developments – aside from Payday Filing! Inland Revenue Papers Exposure Draft 217: Employer-provided travel from home to a distant workplace Exposure Draft 219: Employee use of telecommunications tools and usage plans Operational Statement 19/04b: Commissioner's statement on using a kilometre rate for employee reimbursement of a motor vehicle KiwiSaver Changes KiwiSaver employee contribution rates now 3%, 4%, 6%, 8%, 10% Max contributions holiday period now one year (was five) Now called a “savings suspension” Over 65s can opt-in to KiwiSaver Lock-in period removed Impact on compulsory employer contributions For employees who joined KiwiSaver prior to age 60, we are not required to make contributions after they turn 65. This is correct, the employer contributions are not compulsory. The employee can choose to withdraw funds or continue to be a member of the KiwiSaver scheme and make employee contributions. For employees who joined KiwiSaver at or after age 65, we are not required to make contributions. That is correct. Although employees over 65 can now opt-in to KiwiSaver, there is no lock-in period so compulsory employer contributions are not required. For employees who joined KiwiSaver between 60-64 years of age, we are required to make contributions until the end of their 5 year lock-in period, Yes that is correct, all over 60 year old's who joined KiwiSaver prior to the repeal of the lock-in period (1 July 2019) will remain locked-in to KiwiSaver for the duration of the five year period. This group will remain entitled to compulsory employer contributions until the expiration of the lock-in period. · unless their date of joining was on/after 1 July 2019 (because there is now no lock-in period). Also correct - these individuals will only remain entitled to compulsory employer contributions until they turn 65.

IR transformation – impact on employers Payday filing Pre- populated accounts Tailored tax codes Use of data analytics A lot of change that has and will impact employers

Managing risks Employee receives a demand at year end - how do you respond? Are you comfortable that the payroll is correctly calculating PAYE? Are you comfortable with your paycode settings for PAYE and KiwiSaver? Are you ready to respond to Inland Revenue’s proactivity? Talk about impacts on the above slide

Thank you Vaughan Harrison Partner, PwC Phil Fisher Partner, PwC Jeff Casey Partner, PwC Vaughan is an Assurance Partner and has 18 years experience providing trust, confidence and insights across a range of business, technology, data and change areas. Vaughan reviews a number of payroll functions, processes and systems and will share the common payroll operational and management challenges and risk observed across a range of organisations Phil has been providing tax compliance and consultancy services for more than 25 years, with the last 13 years focused on the delivery of indirect tax advisory services to a range of public sector and large corporate clients. Phil will discuss the common payroll-related challenges and risks he sees at his clients, and share some of the practical ways to navigate these issues Jeff leads the New Zealand Enterprise Applications and Technology Transformation Projects business for PwC. Over his 20 year career Jeff has delivered a large number IT projects and Post-Merger Integrations. He has fulfilled project roles from Process Design through to Program Director across both the public and private sector – covering HR and Payroll, among many others. Jeff has delivered major domestic and multi-national IT projects across the full implementation life- cycle in New Zealand, Australia, United States, England, Japan, Ireland and Russia, © 2019 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.