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Processing a redundancy or a retirement payment (New Zealand)

Redundancy and Retirement payments are paid out when an employee is made redundant or retires from work. These payments are processed in the software through the Allowances.

According to IRD, Retirement and Redundancy payments made to employees are to be taxed at one of four rates and Earner Levy is not to be deducted. In MYOB Exo Payroll New Zealand these payments are dealt with by using allowances that are setup to use the IRD specified Extra Pay calculation.

The following can guide through creating the required allowance and using that allowance for payment:

To create a redundancy or retiring payments allowance
  1. From the Maintenance menu, choose Allowances then click on the Add:F4 button (or press F4) to open the Allowance Maintenance window.
  2. Use the default code that appears or enter the desired number.
  3. Enter the name to appear for this Allowance such as "Retirement" or "Redundancy".
  4. Ensure the Taxable option is selected.
  5. Set the Calculation Method to "Fixed Dollar Amount".

    This method is used when the total dollar figure to be paid is known and is the recommended method for this type of allowance. A different method can be selected if desired.
  6. Leave the Amount at zero.

    This field is related to the Fixed Dollar Amount calculation method. If a different calculation method is selected, the name of this field will change.
  7. Set the Type field to "Extra Pay"
  8. Set the Extra Pay Rate field to 10.5%. Exo Payroll will automatically determine the correct rate at the time of payment, by summing the last four weeks (28 days) of gross taxable pay, grossing this up to a year then adding the extra pay amount - if this figure falls between certain thresholds the higher tax rates may be used. The rate specified here may not be the rate that is ultimately applied to the Extra Pay figure.
  9. Deselect the following Add Earner Levy option.

    Regarding ticking (or not) the other options, MYOB advise seeking legal advice from organisations such as MBIE, EMA, IRD, etc. Ticking the "Not Liable for ACC" option only affects the information that appears on the ACC Employer Premium report.
  10. Click the Save:F10 button or press F10 to save.
To process the allowance in a pay
  1. Open the pay that the employee is to be paid the allowance in (this could be a Current Pay or a One Off Pay) and select the appropriate employee.
  2. Click the Allowances button to open the Allowances window.
  3. Click the Add:F4 button or press F4 to add a new allowance then select the allowance created above.
  4. Enter the dollar amount to be paid through this allowance.
  5. Click the Save:F10 button or press F10 to save.The allowance will now be included in that pay.

Payments not liable for ACC Earners levy in a termination pay

The ACC Earners’ Levy does not apply to redundancy, retirement allowance or Employee Share Scheme benefit payments. Exo Employer Services correctly calculates the tax for these when paid separately. If these are processed in a pay in the same time with a payment that is liable for ACC (e.g. leave payments), the payment will be over-taxed because the ACC Earners' Levy is applied to both payments. This only happens when payments with different liabilities for ACC are processed in the same time.

To fix this, we recommend to run the payments that are not liable for ACC in a One-Off pay, separate from the payments that are liable for ACC.

Need more help? You can open the online help by pressing F1 on your keyboard while in your software.

You can also find more help resources on the MYOB Exo Employer Services Education Centre for Australia or New Zealand.

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