Q: We’ve had an accountant question the PAYE calculation for an employee’s final pay, he sent me the below.

I know years ago that the PAYE was smoothed over the amount of pay periods the payment equated to but that went out the window when the extra pay tax calculation came in and we’ve always let that work out the PAYE in final pays.

The below link, I believe, relates to Annual leave being taken and paid in advance – eg 1 months annual leave taken, employee requests it to be paid out at the start of the pay period, PAYE is then smoothed over the 4 weeks.

Am I correct in that thinking or is the below able to be used if the employee requests it in a final pay?

https://www.ird.govt.nz/employing-staff/payday-filing/non-standard-filing-of-employment-information/holiday-pay-paid-in-advance/calculate-paye-on-holiday-pay-using-the-alternative-approach

A: No this is never by a request of the employee this is the employers position on which approach they use.

The employer has the choice to tax as an extra pay or taxed over the period it represents.

Q: So in our case the choice was made to use the extra pay tax method and that’s ok?  I truly thought the taxed over periods method was gone.

A: It was gone and then IRD brought it back as an option (there was a stink about it).