Why does my PAYE calculation for SA and SA SL tax codes not match the Inland Revenue calculator?

Question

My PAYE calculation does not match with the Inland Revenue's (IR) tax calculator. The IR calculator shows more tax amount than the amounts in Reckon Accounts.


Answer

You will see the mismatch with the PAYE amount due to the exclusion of ACC Earner's Levy for the Tax Codes SA/SA SL (Student Loan) in the calculation of PAYE in Reckon Accounts.

You will notice that the difference of the calculation is only for the tax code SA/SA SL. Reckon Accounts calculates the tax at 39% (exclusive of the ACC levy) and the Inland Revenue calculates at 40.39% (inclusive of the ACC levy) i.e. 39% + 1.39% (ACC Levy).

SA and SA SL tax codes were introduced from April 2021 and these tax codes apply to employees who earn more than $180,000 annually. In the documentation provided to Reckon by Inland Revenue the ACC Levy was not included into the PAYE calculation for the tax codes SA and SA ASL. It was assumed that employees who use the tax code (SA/ SA SL) are already earning more than 180,000 annually and they have passed the current ACC threshold ($130,911).

However, the Inland Revenue later (after Reckon's 2021 release was finalised) included the ACC Levy into the PAYE calculation regardless of the Tax Codes citing there is no way of assuring that all employees using the SA or, SA SL tax codes are also receiving primary income that is equal to or more than $130,911 (current ACC prescribed maximum income).

Due to the above reason, the PAYE calculation between Reckon Accounts and the IR's calculator might differ. The IR has advised that if you are using that method in Reckon Accounts, it may result in over or under deductions and a refund or bill at the end of the tax year.

Please make sure you are aware of any differences that result from not taking the threshold into consideration. Also note any difference will be rectified in the end of year process.

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