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Inland Revenue

Tax Policy

Three-month timeframe for transferring payroll donations

Clause 447


(19 – Volunteering New Zealand, 24 – New Zealand Law Society, 62 – Minter Ellison Rudd Watts)

The three-month timeframe for payroll donations should be shortened. This period is too long given the potential for an employer to become insolvent in the current economic environment.


Proposed section 24Q of the Tax Administration Act 1994 requires employers or PAYE intermediaries to transfer payroll donations to the relevant recipient donee organisations within three months from the end of the pay-period in which the donations were deducted from the employee’s pay.

The three-month timeframe is designed to encourage employers to transfer payroll donations to the relevant recipient donee organisations in a timely manner. It also seeks to help offset some of the employer compliance costs associated with the administration of the scheme by transferring small amounts of money to donee organisations frequently.

In the event of an employer becoming insolvent and any payroll donations not being transferred to the relevant recipients, the tax credit for those payroll donations would be extinguished and the employer would be responsible for paying the resulting shortfall in PAYE. This is further discussed under the section Issue: Shortfall in PAYE when a payroll donation tax credit is extinguished. Additionally, the employee would have recourse to the employer for the payroll donations not transferred, a matter also discussed under the section Issue: Payroll donations held in trust for employees.

On balance, officials consider it important to minimise as far as practicable the compliance costs for employers. The three-month timeframe helps to achieve this result.


That the submission be declined.