Q: Last year in August staff received a back pay to 01 July 2022 for increases made to salary.
In some cases this was processed as part of the fortnightly payment of wages, while others were completed as separate stand alone payments.
An employee has reached out to say that they have received a tax bill from IRD and they are concerned that they were not taxed correctly for these payments.
I believed that the onus of the tax codes is on the employee to monitor when or if they receive a salary increase.
However, the fact sheets on the IRD website appear to indicate it is the responsibility of both the employer and the employee to ensure back pays are processed under the right tax code.
Can you please advise what is correct?
A: Payroll cannot advise an employee on their tax code, as we are not tax advisers, we can only act on an instruction from the employee or IRD. So whatever IRD is putting forward in this area is wrong.
The employee must take control of their own tax affairs so of they know they may get a tax bill they can advise the employer to tax them at a higher rate (inwriting).