New Zealand Decreases Tax Rates on Lump Sum Payments

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By Jared Mondschein

April 12—The Pay as You Earn and Accident Compensation Commission tax rates on lump sum payments from employers to employees have decreased 0.06 cents on the dollar for most payment thresholds, New Zealand Inland Revenue said April 6 in an update on its website for the tax year that began April 1.

All threshold amounts except for the maximum threshold of NZ$122,063 ($84,234) remain unchanged from the prior year.

Lump sum payments include annual or special bonuses, cashed-in annual leave, retiring or redundancy payments, payments for accepting restrictive covenants, exit inducement payments, gratuities, or back pay. Overtime or any regular payments are not considered lump sum payments.

When the combined total of the lump sum payment and the grossed-up annual value of the employee's primary employment income for the previous four weeks is:

• NZ$14,000 ($9,661) or less, the rate is 11.89 cents on the dollar, a decrease from 11.95 cents;

• NZ$14,001 to NZ$48,000 ($33,124), the rate is 18.89 cents on the dollar, a decrease from 18.95 cents;

• NZ$48,001 to NZ$70,000 ($48,307), the rate is 31.39 cents on the dollar, a decrease from 31.45 cents;

• NZ$70,000 to NZ$122,062 ($84,234), the rate is 34.39 cents on the dollar, a decrease from 34.45 cents;

• NZ$122,063 or greater, then the whole lump sum can be taxed at a rate of 33 cents on the dollar, a rate that has remained unchanged from the prior year.

Employers also can apply a tax rate of 34.39 cents on the dollar if an employee requests it, a decrease from 34.45 cents.

To contact the reporter on this story: Jared Mondschein at jmondschein@bna.com

To contact the editor responsible for this story: Michael Baer at mbaer@bna.com

For More Information

The latest tax rates on lump sum payments is available at http://www.ird.govt.nz/payroll-employers/make-deductions/staff-benefits/bonuses/emp-ded-bonus-lump-sum.html.

More information on payroll issues in New Zealand can be found in the New Zealand country primer.