Navigating New Tax Changes: What You Need to Know

From 1 August 2024, new tax changes have come into effect in New Zealand, bringing adjustments that could impact your payslip, tax codes, and overall take-home pay. Here’s a clear breakdown of what’s changed, what to keep an eye on, and how to ensure you're set up correctly.

What Are the Changes?

The key change is an increase in the income tax thresholds, which means you could end up paying less in tax on your earnings. Here’s how the new brackets look:

These changes are designed to reduce the amount of income tax paid by individuals earning over $14,000 annually, which is welcome news for most workers. The brackets had remained unchanged since 2010, apart from the top threshold adjustment in 2021. With wages steadily rising over time, these new thresholds aim to relieve some of the tax burden.

What’s Affected?

Most payroll software providers should have already integrated these new tax cuts, meaning your PAYE (Pay As You Earn) deductions should automatically adjust in your next pay. However, as with any significant change, there could be some initial hiccups.

• Employers: If your payroll software provider hasn’t communicated any updates, it’s crucial to check in with them. This ensures your employees aren’t inadvertently short-changed on their first post-July payment.
• Employees with Secondary or Tailored Tax Codes: You may need to revisit your tax code settings to align with the new thresholds. This is especially important if you’re using a secondary or tailored tax code, as outdated settings could lead to over or underpayment of taxes.

What to Look for in Your Payslip

With these changes now in play, here’s what to check on your next payslip:

• Updated PAYE Deductions: Confirm that your PAYE deductions reflect the new tax brackets. If the figures don’t seem right, it may be worth a quick chat with your payroll team.
• Correct Tax Code: If you’ve adjusted your tax code due to the new thresholds, ensure this is accurately reflected.
• Overall Take-Home Pay: Thanks to the reduced tax burden, you might notice a slight increase in your take-home pay. Double-check this matches your expectations based on your income bracket.

Next Steps

Whether you're an employer or an employee, staying informed and proactive about these changes is crucial. Employers should ensure their payroll systems are updated and functioning correctly, while employees should verify their tax codes and pay details. If you encounter any issues or have questions, it's wise to reach out to Inland Revenue or your payroll provider for assistance.

At Lifetime, we're here to help you navigate these changes smoothly. If you need further guidance on how these tax updates affect your financial situation, don’t hesitate to get in touch. Your financial wellbeing is our priority, and we’re always ready to support you in making the most of these adjustments.

Disclaimer: This article has been prepared for the purpose of providing general information, without taking into consideration any particular person's objectives, financial situation or needs. Any opinions contained in it are held by the author as at the report date and are subject to change without notice.