New Zealand Payroll

Everything you need to know about paying your NZ based staff

Change to Tax Calculations for Annual Leave

07 June 2016- 5 min read


In the past when an employee was paid Annual Leave as a lump sum before they went on holiday, we were able calculate their tax based on the number of pay periods the payment covered. We were also able to tax final pays over a number of periods.

The IRD have changed their policy and now we must tax these payments as lump sums.

The affect is that your employees will pay more tax when they have their leave paid out before they go on holiday than if they were paid some leave each pay period on your normal pay cycle.

In most cases this change will mean that your employees will end up overpaying their tax for the year and so will be due a refund at the end of the tax year.

In our opinion this change penalises employees who want to get all their leave paid out before they travel. The IRD believe it reduces the likelihood of underpaying tax. You can find their statement here

Please let your staff know about this change as it may affect their holiday plans.



About the Author

Find out more about the author and follow them and social media to stay connected with them

Evan Lyon

Evan Lyon

KeyLink owner, 25+ years experience in designing, building and running mission critical IT systems. More than 12 years experience supporting and using payroll systems.


Leave a Comment

    Trending in Business

    Featured Posts

    Lets Stay Connected

    Contact Us

    Group 430

    +64 9 280 0328

    09 May 2020- 9 min read

    Ending Employment Relationships (Terminating Employees)

    Unfortunately one of the effects of the COVID-19 pandemic will be that many businesses will be terminating the employmen...

    Read More
    09 May 2020- 8 min read

    Changes to Employment Agreements

    Changes to Employment Agreements must be the result of a good faith negotiation. Changes then need to be reflected in th...

    Read More
    09 May 2020- 5 min read

    COVID-19 Leave Support Scheme

    This is available for for employers, to pay their employees who can't work because:

    Read More