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This is a question for Payroll Software providers.  If ACC levies are  capped at a  Gross Income of $106,473 do you automatically tax all income above this threshold at 38% or are you using a rate of 39.7%?

If it is the latter then are you not overtaxing employees to the tune of 1.7%?

If this is the case then surely employees are entitled to a refund of their ACC Levies on any payments made after their income exceeded $106,473?

One Response to “ACC Calculations over $106,473”

  1. smoothpay says:

    It’s not quite that simple.

    ACC is collected in TWO ways:

    1. With every PAYE calculation a levy is incurred based on the employees earnings for the current pay period (extrapolated out to 52 weeks, tax calcs performed, then diminished to suit pay period – problem with this method is that the employee’s YTD earnings are NOT taken into account, and until they are the results will never be satisfactory, and result in the employee having to claim any refund due (which is why we have a Tax Tattler on our earnings certificates, so the employee has a fair chance of knowing if they’re entitled to a refund or not)). You cannot “separate” the ACC component – it forms part of the overall tax calculation (well, you could, but there’s no need for it, and if you did and tried to take it into consideration when calculating tax for the period and made an adjustment it would no longer agree with the IRD’s tax calculation specifications or the tax guide – so you’re basically stuck with this – anything else would be non-spec.

    2. The annual ACC premiums charged by ACC. These are calculated based on the data that IRD receives from EMS – however the EMS doesn’t provide ACC with details of 1st week ACC payments and other non-liable values (if any – our ACC liability schedules show what these values are at the end of each year). Because you only get billed for these annually, large errors can creep into the ACC’s version of what should be charged, as opposed to SmoothPay’s real interpretation of what should be paid. And yes, you can save more than the cost of your payroll if your company has these exceptions.

    As for the method of calculating PAYE taking into account earnings in excess of the threshhold: Sure, the spec and calculation take the threshhold into account, but as stated above only for the current pay – in isolation of any and all other earnings. There are many employees paying the levy on non-liable earnings (if taken all together) – and the only remedy in this case is to claim a refund at the end of the year like everyone else.

    HTH

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