Essential Checklist for Bookkeepers: Navigating New Zealand's 2024 Personal Income Tax Changes

Navigating New Zealand’s 2024 Personal Income Tax Changes

The recent changes to the personal income tax thresholds, announced as part of the 2024 Government Budget, will come into effect on 31 July 2024.

Here’s what bookkeepers need to focus on to ensure their clients are compliant and take full advantage of the updates:

Understanding new tax thresholds

Ensure your clients are aware of the updated personal income tax thresholds in New Zealand coming into effect on 31 July 2024:

  • $0 – $15,600: 10.5%
  • $15,601 – $53,500: 17.5%
  • $53,501 – $78,100: 30%
  • $78,101 – $180,000: 33%
  • Above $180,001: 39% (unchanged)

Secondary Tax Codes

  • Check Thresholds: For clients using secondary tax codes, review whether their PAYE income falls within the new tax thresholds.
  • Update Tax Codes: If necessary, clients need to update their tax code using the IR330 form and submit it to their secondary income payer.

Resident Withholding Tax (RWT)

Investment Income: Verify the RWT rates for clients with investment income. Ensure they inform their bank or investment provider to update their RWT rate after 31 July if needed.

Provisional Tax

Re-assessment: For clients paying provisional tax, re-evaluate their estimated tax payments based on the new thresholds. Discuss whether a re-estimate is necessary to avoid underpayment or overpayment.

Tailored Tax Codes

Recalculation: Clients with tailored tax codes will have these recalculated automatically. Ensure they receive and understand their new certificate and provide it to their employer.

Working for Families Payments

  • Minimum Family Tax Credit (MFTC): The yearly after-tax income threshold increases slightly. Verify that clients eligible for MFTC are aware of the new income limit.
  • In-Work Tax Credit (IWTC): The base rate increases significantly. Confirm that eligible clients receive their updated entitlement notice and understand the new rates.

Paid Parental Leave (PPL)

Automatic Updates: Inform clients that PPL will adjust automatically to reflect the new tax thresholds. Ensure they receive their new Notice of Entitlement.

Additional Actions

  • Review Communication: Make sure your clients receive all necessary notices either through myIR or postal mail.
  • Use Treasury Calculator: Encourage clients to use the Treasury calculator to estimate how the changes affect their household income.
  • Stay Updated: Continuously monitor any further updates from Inland Revenue to provide the most current advice to your clients.

These updates aim to provide tax relief and adjustments for individuals and families. As a bookkeeper, ensuring your clients are aware and prepared for these changes is crucial for maintaining compliance and optimizing their tax obligations. Regularly review and adjust systems, provide clear guidance on necessary forms and updates, and keep open lines of communication to support your clients through these transitions.