Summary

This topic covers Allowance Taxation Override functionality specific to New Zealand.

Allowance settings

When you set up an allowance record with a taxation override, you can specify the type of override, to control how the tax is calculated. This also determines which fields are enabled on the Tax overrides tab of the allowance form in Transaction View.

For more details see Allowances | Details (i)

Transaction Entry Form |Allowances | Tax overrides tab fields

When you are in Transaction View and you open an Allowance transaction there is a Tax overrides tab.

If the pay is open regardless if whether it is processed or not it will display the fields and their default values in input mode.

If the pay is open and has been processed, to see the post processed values you must use the action CTRL + D to open the form rather than the usual double-click action.

If the pay is closed, the opposite actions are needed, i.e. double-click to open shows the values after the pay was processed, CTRL + D will show the input values the process pay started with.

The fields on this form will behave according to the Tax Override type that is set.

Extra Pay

If the Allowance record's Tax override type is set to E. Extra Pay or R.Redundancy/Retirement, then Extra pay is defaults to Yes. In this case the Override type field will also be either Xtra Pay Calc or Xtra Pay Calc on Term.

If you are working with an allowance record that had no Tax override type set and you need it to be an 'Extra Pay', you are best to use an allowance record that has been configured as 'Extra pay' but you can also set the Override type field on this Transaction Entry form to Xtra Pay Calc and the system will set the Extra Pay field to Yes when the pay is processed.

Override Amount

The value entered into the Override Amount field is dictated by the Override type applied.

Override type

• %

  % is the default value for Allowance record's where the Tax override type is W. Scheduler Payments.

  Used for employees who must pay a specific percentage of tax.

• Fixed

  Does not derive from an Allowance record, needs to be manually set.

  Used to specify the exact amount of tax the employee pays.

  Typical use cases are: Reversing a pay or not agreeing with PayGlobal's calculations.

• Xtra Pay Calc

  Xtra Pay Calc is the default value for Allowance record's where the Tax override type is E. Extra Pay or R.Redundancy/Retirement.

  From 1 April 2025 this option can only be used for "current employees". If the system detects the pay is for termination or post termination pay it will automatically change the Override type to Xtra Pay Calc on Term. This is to help the system identify that it needs to calculate the employee's annualised PAYE income on the value of all payments made in the four weeks prior to, and inclusive of the day on which the extra pay is paid.

  Also see Extra Pay Details fields

• Xtra Pay Calc on Term

  From 1 April 2025, if the system detects the pay is for a termination or post termination, i.e. the pay contains a Termination Allowance and the pay contains any Extra Pay allowances, it will automatically update the Tax override type setting from Xtra Pay Calc to Xtra Pay Calc on Term. This is to help the system identify that it needs to calculate the employee's annualised PAYE income on the value of their last two paid pay periods before the pay period of this pay.

  Note: This is a system only option. You cannot change transactions that have this setting and you cannot select this option from the field's picklist. If you disagree that a lump sum amount within a termination pay or post termination pay needs to be taxed as described above. You will need to enter a whole pay Taxation Override (T. Tax Override type allowance) into the pay.

• B. Regular Bonus

  B. Regular Bonus is the default value for Allowance record's where the Tax override type is B. Regular Bonus.

  Applies to bonus payments you pay where the frequency at which you pay your employees their bonuses is less than the frequency they receive their normal pay, e.g. a weekly/fortnightly employee that receives monthly bonuses. A monthly employee that receives quarterly/six-monthly bonuses.

  Bonuses paid regularly are taxed by adding the bonus amount to the employee's gross wages for the pay periods in which they were earned. You define the number of pay period the regular bonus relates to in the Override amount field

Extra Pay Details

As of 1 April 2025, if this transaction is included in termination or post termination pay (i.e. one where there is a termination allowance) then editing all fields except the Redundancy or retirement field will not be permissible. The value set on the termination allowance is copied to this transaction.

For more details on the Extra Pay Calculations see Extra Pay (NZ)

Redundancy or retirement:

Enabled when Extra pay = "Yes". Redundancy or retirement payments are not liable for the ACC Earner Levy.

This Yes/No field determines whether tax on this extra pay includes the ACC Earner Levy.

If you set Redundancy or retirement to "Yes", then the following Confirm message appears:

"Setting this field to Yes will affect all transactions in the pay and set them to 'Earnings not liable for earners' levy'
Is this correct?"

• If you click "Yes" then PayGlobal keeps Redundancy or retirement = "Yes".
• If you click "No" then PayGlobal changes Redundancy or retirement to "No".

  Note: We recommend that you set any specific types of taxation override at allowance level. You should use Taxation override transactions to adjust tax only when the adjustment applies to all transactions in the pay.

Elects to tax at higher rate:

Enabled when Extra pay = "Yes" and Override type = "Xtra Pay Calc".

Extra pay has tax rates based on income ranges. If the employee's total income plus their extra payment does not place them in the income range for the highest tax rate, then they can still opt to have the lump sum taxed at a higher tax rate. An employee could decide to use this option if some of their income was not taxed, such as rents.

Calculate grossed up amount:

Enabled when Extra pay = "Yes" and Override type = "Xtra Pay Calc".

For "Current" employees, this Yes/No field determines where the gross-up amount needs to come from when you process the pay.

• Yes (default) = PayGlobal automatically calculates the Grossed up annual amount when you process the pay.
• No = You will enter the Grossed up annual amount (aka Annualised amount), do not include the value of the Extra Pay or in the case of employees on secondary tax code the related low rate threshold. PayGlobal will do this for you on processing the pay.

It is recommended that set this field to "No" when:

• PayGlobal does not have the necessary 4 weeks (for current employees) or 2 pay periods (for terminating/terminated) employees in the database.
• You want to override the amount PayGlobal calculated.

Grossed up annual amount:

Enabled when Extra pay = "Yes" and Override type = "Xtra Pay Calc"

It is only recommended to override the system calculated value when the employee has no pays from which to calculate an annualised amount or you disagree with the amount PayGlobal has found from the data stored in your database.

To enter a value in this field for current employees, make sure Calculate grossed up amount is set to No first. Then enter a value based on the follow business rules outlined by IRD, i.e. the salary or wage payments made in the four weeks prior to, and inclusive of the day extra is to be paid.

Tax codes with Lower rate flagged:

When you process the pay, PayGlobal sets this field to "1" if the employee is taxed at the lowest extra pay rate; otherwise it sets this field to "0".

Note: This setting is used in Payday Filing

Earner Levy:

When you process the pay, PayGlobal splits out the earner levy component of the PAYE and displays the value in this read-only field.

Student Loan:

When you process the pay, the Student Loan repayment for this transaction is displayed in this read-only field.

Note: To see PAYE, Earner Levy, and Student Loan values on a transaction with Source = "Transaction Added/Changed", you need to use the Ctrl+D shortcut key to open it, rather than double-clicking it.