Hate paying provisional tax? I’ve got you covered!

Instead of taking drawings, go onto a PAYE salary and then you won’t have to worry about provisional tax or end of year tax bills!

With payroll software such as iPayroll or Xero payroll, with a few really easy clicks you can be on a PAYE salary and never have to think about provisional tax or end of year tax surprises again.

How can this be done?

If you take $2,000/week in drawings for instance, after setting aside $1,000 for tax ($3,000 gross earnings), then in the payroll software, you declare gross earnings of $3,000 and the software will tell you the PAYE on that income.

The PAYE will be due the following month (usually the 20th). So, set the weekly PAYE tax aside in a separate bank account so there are no issues when you come to pay the PAYE to IRD the following month.

I’d also recommend if you have a company, that you check you are paying yourself the full profit of the company. If so, in the above example, the company would be making $3,000 per week in net profit (revenue minus all expenses). If you’re not doing so, make sure you are leaving the profit that you aren’t paying yourself in the company bank account. If you don’t, you run the risk of running into tax issues at year end.  

And to summarise, here’s how to get onto PAYE in three easy steps:

1. Sign up to an online payroll provider; iPayroll and Xero payroll are both great options.

2. Work out your weekly, fortnightly, or monthly net profit you would like to pay yourself and enter that figure into your payroll providers software. Or, if you look at your business bank account and want to pay yourself the current balance, then enter that figure into the software.

3. The payroll software will calculate your PAYE. Pay yourself the net amount, and set aside the PAYE to pay over to the IRD the following month.

4. Stop worrying about provisional and end of year tax bills!