PAYE and payday filing: what's due, when, and how to fund it

Payroll is the one bill an employer can never skip. Staff are paid on payday, and the deductions taken from their pay, plus your KiwiSaver contributions, belong to Inland Revenue from that moment. Getting the filing and payment rhythm right keeps the business compliant and stops PAYE becoming an accidental source of short-term funding.

What is payday filing?

Payday filing means sending Inland Revenue your employment information (who was paid, how much and what was deducted) every time you pay staff, rather than once a month. If you file electronically, through payroll software or myIR, the deadline is within 2 working days of each payday. Paper filers have 10 working days.

Most payroll software files automatically when you finalise a pay run, so the main job is making sure that happens and checking for errors.

When do you pay the deductions?

Filing and paying are separate. The payment timetable depends on your size:

Employer type	Threshold	When deductions are due
Small employer	Under $500,000 of gross PAYE and ESCT a year	Monthly, by the 20th of the following month
Large employer, pay days 1st to 15th	$500,000 or more	By the 20th of the same month
Large employer, pay days 16th to month end	$500,000 or more	By the 5th of the following month

So for a small employer, all of March’s payroll deductions are due by 20 April.

What goes into the payment?

One payment to the employer deductions account can cover:

• PAYE deducted from wages and salaries
• KiwiSaver deductions from employees’ pay
• KiwiSaver employer contributions
• Employer superannuation contribution tax (ESCT)
• Student loan deductions
• Child support deductions

Because PAYE includes the ACC earners’ levy for employees, there’s nothing separate to pay for that here; your own ACC work levy comes later by invoice.

How should you plan the cash?

The risk with a monthly payment is that the money sits in your account for up to seven weeks and starts to feel like yours.

Illustrative example. A Tauranga construction company pays fortnightly wages totalling $96,000 gross a month. PAYE, employee KiwiSaver deductions, employer contributions, ESCT and student loan deductions come to about $27,000 a month. If that sits in the operating account until the 20th of the next month, the business is effectively running on $27,000 of Inland Revenue’s money for several weeks.

Better habits:

• Move deductions to a tax account on each payday, along with GST and provisional tax savings. The amount is known the moment the pay run is finalised.
• Pay on payday if cash allows, or set a scheduled payment for the 19th.
• Watch the 20th in January. December’s payroll includes holiday pay and is due on 20 January, just after the 15 January GST and provisional tax dates. See planning the summer close-down.
• Plan for April. Wage increases and the KiwiSaver rate change take effect from 1 April, so April’s deductions (due 20 May) are higher.

Our business money calendar shows how the 20th fits with GST and provisional tax across the year.

What happens if PAYE is paid late?

Late payment penalties can apply from the day after the due date, with a further penalty after seven days and, for PAYE, an ongoing monthly penalty while it remains unpaid (unlike GST and income tax). Inland Revenue treats employer deductions seriously, partly because they include money taken from employees’ pay, such as their KiwiSaver contributions.

If you can’t pay on time, contact Inland Revenue before the due date. An agreed instalment arrangement generally reduces penalties compared with paying informally without one.

How does payday filing help with cash planning?

Because Inland Revenue receives employment information every payday, your deduction totals are known the moment each pay run is finalised. That makes the employer deductions bill one of the most predictable payments a business has. Use that predictability: set your payroll software to show the deductions total on every pay run summary, and transfer that amount to your tax account the same day. At month end, the account should hold exactly what’s due on the 20th.

It also means mistakes surface quickly. If a pay run is corrected after filing, the amendment flows through to Inland Revenue’s records, and the deductions due change with it. Checking pay runs before finalising them avoids the amendments altogether.

Should payroll be funded from a cash reserve?

Payroll should be funded from trading cash; a reserve exists so payroll is never at risk when receipts are late. If the business regularly needs the reserve or the deductions money to make payday, that’s a sign of a working capital gap. Our page on how big a cash reserve should be suggests sizing it in weeks of fixed outgoings, of which payroll is usually the biggest.

When wages are growing faster than cash

Growing teams, longer payment terms and seasonal peaks can all mean payroll grows before revenue catches up. If that’s where your business is, a planned facility is far better than leaning on Inland Revenue’s money. You can check your options in about a minute.

Payroll covered, plans funded

Keeping deductions separate and on time protects the business and its people. If growth means payroll is outpacing receipts, talk to us. We look at unsecured options for trading businesses and loans secured on residential or commercial property. Enquiring involves no credit check, your enquiry stays with our team instead of being sent around, and a real person on our New Zealand team reads it. Accurate answers on the form make the first call useful. See if you qualify.