Oracle Payroll enables you to meet the statutory requirement to deduct Income Tax and Insurance contributions from employee earnings. The following topics explain how tax and insurance deductions are implemented in Oracle Payroll for New Zealand:
PAYE: Legislative Details
PAYE in Oracle Payroll
Oracle Payroll allows you to process tax and insurance deductions for employers and employees, and helps you comply with the legislative requirements applying to your organization.
Yes. Oracle Payroll supports many country specific models of taxation, including the local, federal and state tax requirements of organizations operating in the US.
Yes. You can calculate taxes for different types of employer to represent the diversity of your organization. You can also make retrospective adjustments to allow for overpayments and underpayments.
Yes. The details of taxation policy and social security entitlements are constantly changing, but Oracle Payroll is always promptly updated so that your processing includes the most recent updates.
Yes. EDI allows two-way electronic transmission of documents between the Inland Revenue and employers. Oracle UK Payroll has developed a specified formatted file that, if used in conjunction with third party software, can be transmitted electronically to the Inland Revenue.
You can use Oracle HR to update your records throughout the year to show all the Class 1A National Insurance contributions for which your organization is liable. You can make this information available to employees so that they can preview their NI liabilities. You can then generate a report to view the final details and you can submit the complete and validated records to the Inland Revenue to comply with all reporting requirements.
Pay As You Earn (PAYE) is the system of deducting income tax installments from employees' personal earnings, and remitting the money to the New Zealand Inland Revenue Department (IRD).
The amount of tax payable is determined by the information provided on the Employment Declaration form.
What tax codes are available for PAYE?
The following tax codes have been defined by the IRD for 2000/2001:
| Code | Description |
| M | Main Income |
| ML | Main Income <$9880 |
| S | Secondary Income =<$38000 |
| SH | Secondary Income >$38000 |
| CAE | Casual Agricultural Employees |
| EDW | Election Day Workers |
| M SL | Main Income with Student Loan |
| S SL | Secondary Income =<$38000 with Student Loan |
| SH SL | Secondary Income >$38000 with Student Loan |
| ND | Non-Declaration rate |
| Extra Emolument | |
| STC | Special Tax Code |
| ST | Secondary Income >$60000 |
| STSL | Secondary Income >$60000 with Student Loan |
The tax year starts on 1 April one year and ends on 31 March the following year. Each tax year may be referred to as a combination of the two partial calendar years, for example 99/00.
Oracle Payroll provides as startup data all the elements, balances and other components you need to correctly administer PAYE. It also provides legislative upgrades to keep your payroll processing up to date with current legislation.
If you include employees in more than one payroll run each processing period, Oracle Payroll's calculations for tax deductions take into account the sums already deducted in that period.
A student loan deduction is payable by employees who have an outstanding student loan to pay. Employees can elect to repay the loan at a rate greater than the specified rates. If an employee has a student loan debt owing and no amount has been entered in the Student Loan Rate field, the standard loan deductions will apply.
Child support is payment made by a parent that does not live with their child or children to help with the financial support of the child or children. Payment is either forwarded to the person caring for the child or to the government.
The following table describes the child support codes that apply in New Zealand:
| Code | Description |
|---|---|
| C | Ceased Employment |
| A | Advanced Payment |
| P | Protected Earnings |
| S | Short Term Absence |
| D | Deducted Previously |
| O | Other |
An emolument is payment by the employer to the employee in recognition of work or duties performed, additional to normal salary or wages.
Employees can elect to have their extra emoluments taxed at the higher rate.
The tax code indicated on the Employment Declaration determines the appropriate rate at which a person's income will be taxed.
In some circumstances, a person can apply to the IRD to receive a deduction rate certificate. This certificate may entitle the employee to a variation in the amount of tax they would normally pay.
An employer is required to pay a Specified Superannuation Contribution Withholding Tax (SSCWT) at the time of making superannuation contributions for an employee.
If the employer fails to pay the required rate, they must calculate the outstanding withholding tax and forward payment to the employee's superannuation contribution fund.
Employee and employer can contribute to a Payroll Giving Donations voluntarily. Employees are eligible for a reduced total PAYE obligation on EMS for the amount deducted from their net pay. Employer reduces total PAYE obligation of the employee on EMS and contributes this Payroll Giving deduction to charity. Payroll Giving is only available to employers who lodge the EMS electronically.
Employees receive an immediate tax credit for their donation(s) to a donee organization (listed on Inland Revenue's Donee List) when they donate in a Payroll Giving program.
Employers are responsible for calculating the correct tax credits for each payroll donation made by their employees. Once the tax credit has been calculated, the employee's PAYE is reduced by the amount of the tax credit. Employees must meet all their tax obligations and any payments legally required to be deducted from their pay before making a donation.
Oracle provides predefined elements for recording the Payroll Giving Donation information and formulas and balances for calculating the applicable tax credits for the employee.
Employees are paid a regular bonus frequently throughout the year, such as monetary incentives, production bonuses, and overtime. Oracle HRMS for New Zealand now supports the following Bonus calculation methods for calculating these bonus payments:
Bonus for a single pay period - Regular bonus payments - Taxed along with normal earnings only.
Bonus for a month - covering at least single pay period
Bonus for more than a month - covering many pay periods
Employee can receive certain amount under an Employer Share Scheme (ESS). Employers must report ESS share benefits as part of the PAYE system. For the purposes of PAYE returns and the Employer Monthly Schedule (EMS), the value of ESS benefits are reported as employment income. Employers can elect to withhold PAYE on any taxable income as part of their standard payroll process, and remit that tax to the Inland Revenue.
Employers can record whether the PAYE tax has to be deducted from employees on the extra pay paid. Oracle delivers the element ESS Information for calculating the amount. The input value Deduct PAYE Tax of the element ESS Information is used to record whether the amount is to be deducted.
The taxable value of the benefit is displayed as a separate record on the EMS whether or not PAYE has been withheld, with the following information:
Employee IRD Number
Employee Name
Employee tax code (ESS)
Gross earnings (the taxable value of the ESS benefit)
Earnings not liable for ACC Earners' Levy (the taxable value of the ESS benefit
PAYE/Tax
Student Loan deductions
The Employer Share Scheme benefits is reported on the EMS except in the following circumstances:
The value of an ESS benefit is included as income for the purposes of student loan deductions.
No ACC and KiwiSaver is calculated on ESS amount and therefore not reported on the EMS
Oracle HRMS enables you to protect a user defined amount of an employee's pay from Child Support deductions.
If an employee chooses to alter the protected earnings amount, you can enter an override in the Child Support Protected Earnings Percentage element.
To enter details about child support protected earnings
Link the element Child Support Protected Earnings Percentage from the Element Link window.
Enter the element in the Element Entry window for the employee.
Choose the Entry Values button and enter the percentage value of protected earnings for the employee. Enter a value between 0 and 1. For example, entering 0.1 will equate to 10%.
Run your payroll.
If an input value has been entered for the element, this will be reflected in the Child Support Deduction. If no value has been entered, the Child Support Deduction will use the protected earnings default of 60%.
Employees who have received income support incorrectly, can have a proportion of their salary deducted to go towards payment of their accumulated income support debt.
Deductions can be made at regular periodic intervals, or in one lump sum payment in one period only.
For regular payments, set an end date to stop payments being deducted once the set amount has been reached.
For lump sum payments, the end date of the element needs to be set after the element is processed in a pay period.
You enter income support deduction details in the Element Entry window.
To deduct income support debt payments from an employee
Attach the element WINZ Deduction to the employee assignment.
Set the effective dates for the deduction.
Choose the Entry Values button.
Enter the total amount outstanding in the Pay Value field.
Enter the deduction amount.
Optionally enter a reference number.
Save your work.
Oracle HRMS allows you to make deductions from an employee's pay for the purpose of paying back an Inland Revenue arrears debt.
To set up an Inland Revenue arrears deduction
Attach the element Inland Revenue Arrears Deduction Override in the Element Entry window for the assignment.
Click on the Entry Values button to enter the deduction override for this element.
If the Deduction Override field is set to Yes, then the amount entered in the element Inland Revenue Information is treated as the negotiated amount, and is treated as a one time lump sum deduction.
If the Deduction Override field is set to No, then the amount entered in the element Inland Revenue Information is treated as a Targeted Deduction, and the deduction will continue to be deducted in each pay period until the target deduction amount is reached.
Employees with outstanding student loans can deduct a percentage, fixed amount, or combination of the two from their pay.
Normal student loan payments are made by entering the loan details in the elements PAYE Information and Student Loan Deduction.
Oracle HRMS also allows for payments in addition to the default repayment percentage of 10% of an assignment's salary.
To enter student loan payment details
Attach the elements PAYE Information, and Student Loan Deduction to an assignment from the Element Entry window.
See: Making Manual Element Entries, Oracle HRMS Compensation and Benefits Management Guide.
To make standard 10% deductions for an assignment, click on the element Student Loan Deductions, and then click on the Entry Values button.
Enter the total amount outstanding in the Pay Value field of the Entry Values window.
To make payments additional or in excess of the default payment amount
Link the element Student Loan Information and attach the element to an assignment using the Element Entry window.
See: Making Manual Element Entries, Oracle HRMS Compensation and Benefits Management Guide.
Click on the Entry Values button to enter the input values for this element.
Enter the additional amounts to be deducted. Repayment can be in the form of one of the following:
Student Loan Additional Percentage
Student Loan Additional Amount
Student Loan Amount
Save your work.
Oracle provides predefined elements recording the Payroll Giving Donation information and formulas and balances for calculating the applicable tax credits for the employee.
To set up Payroll Giving Donation
Attach the element Payroll Giving Donations to the assignment.
Record in the Amount input value.
Run payroll. The application calculates the appropriate deductions and tax credits and display the results and feeds the balances.
When employees are paid regular annual bonus, the application calculates the tax on the annual bonus tax separately instead of taxing it as on lump sum payments (extra emolument) or normal PAYE. Follow the steps given below to calculate taxes on regular annual bonus payments.
To calculate tax for Regular Annual Bonus payments
Create a custom Bonus element within the new primary classification Regular Bonus Earnings.
Select the Bonus element as balance feed to NZ Bonus Earnings.
Link the element to all payrolls.
Add the element Bonus Information element to the assignment which records Bonus Type and Periods spread over.
Run the payroll.
View results.
You can view the custom Bonus element under Earnings section and PAYE, Levy, Normal SL, SLBOR , SLCIR (which includes the respective values on Bonus amounts also).
Employers can provide benefits to employees in the form of employer share schemes (ESS). These are recorded and taxed as extra pay. The taxable value of the benefit is displayed as a separate record on the EMS whether or not PAYE has been withheld.
To set up Employer Share Scheme
Define your ESS Information elements.
Select Extra Emolument Taxable Earnings classification.
When creating an ESS element, make sure you assign the secondary classification as Employee Share Scheme Earnings.
Link the ESS Information element to the payroll.
For the ESS Information element, specify if you want to deduct PAYE tax. When you select Yes, it triggers the fast formula PAYE CALCULATION to deduct the tax on ESS appropriately.
If there are any retrospective changes, then set up the appropriate feeds to the balances - Employee Share Scheme Earnings, PAYE Tax Deductions for ESS and Student Loan Deductions for ESS.
Run payroll. The application calculates appropriately and displays the ESS information on the EMS.