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Payroll Team Update

TAXING OF LUMP SUM PAYMENTS EFFECTIVE 1 APRIL 2016

Lump sum payments from primary employment – What is a lump sum payment?
Lump sum payments include annual or special bonuses, retiring or redundancy payments, payments for accepting restrictive covenants, exit inducement payments, gratuities or back pay. These are also called "extra pays".
Overtime or any regular payments are not lump sum payments.
PAYE applies to lump sum payments as follows:

At a flat rate of 11.89 cents in the dollar
– when the combined total of the lump sum payment and the grossed-up annual value of the employee's income for the previous four weeks is $14,000 or less

At a flat rate of 18.89 cents in the dollar
– when the combined total of the lump sum payment and the grossed-up annual value of the employee's income for the previous four weeks is from $14,001 to $48,000.

At a flat rate of 31.39 cents in the dollar
– when the combined total of the lump sum payment and the grossed-up annual value of the employee's income for the previous four weeks is from $48,001 to $70,000.

At a flat rate of 34.39 cents in the dollar
– when the combined total of the lump sum payment and the grossed-up annual value of the employee's income for the previous four weeks is greater than $70,000, but less than the ACC earners levy maximum threshold of $122,063 (for the 2017 tax year). Amounts above this level should have PAYE applied at 33%, or – when the employee asks you to use this rate.

IRD Mileage Rates
Inland Revenue released a statement on the 4th May following a review on mileage rates that there will be a reduction to the rate to 72 cents (from 74 cents for 2015) for both petrol and diesel vehicles for the 2016 income year.

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