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On 23/03/2021 the IRD advised that there was an error in their payroll calculations specifications whereby the ACC earners' levy was not factored into the income tax calculation that was specified. This correction effectively means that the income tax rate for the SA and SA SL tax codes is actually 40.39% (39% plus 1.39% ACC earners' levy) and not 39% as previously indicated.

Since this late notice of the error by the IRD does not give enough time for FastTrack to implement, test and deploy a change in the tax process to support the correction in time for 1 April, it is recommended that if you have payees who are subject to either of these pay codes that you manually adjust the tax amount at the Tax pay batch stage to factor in the additional 1.39% of taxable gross pay that must be calculated towards the ACC earners' levy.

Because the PAYE Tax Details fall under the validity periods on the Payee record, an existing payee's tax code may be locked if the payee has already been paid previously. Therefore, to change a payee's existing pay code to the new pay codes of SA or SA SL you may need to add a new validity period to the Payee record. For more information, see Payee Validity Periods (NZ).

Note that when calculating tax in a pay batch, FastTrack360 will use the tax code that is valid on the end date of the pay period in which the payment is being made. Therefore, if you have payees who will be subject to the SA or SA SL tax codes from 1 April 2021, it is recommended that you add a new validity period to the relevant Payee records as soon as possible after upgrading to v11.39 so that affected payees are taxed correctly in their first pay period that falls into the 2021-22 tax year.