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Income Tax Act 2007

General collection rules - Employment-related taxes - Types of PAYE income payments

RD 8B: Treatment of PAYE-related overpayments

You could also call this:

“How overpaid wages are handled for tax purposes”

This section talks about what happens when your employer pays you too much money by mistake or as an advance. If you’re not supposed to keep this extra money, it’s called a PAYE-related overpayment.

Your employer might have paid this extra money as part of your regular pay, extra pay, or a special type of payment. If you haven’t paid it back, and there’s no agreement for you to repay it, it’s called an unrepaid PAYE income overpayment.

The law says that this extra money should be treated the same way as the original payment it was part of. So, if it was part of your regular pay, it’s still treated as regular pay.

There are some cases where this rule doesn’t apply. For example, if you stole the money, if it’s an overpayment of a benefit or grant, or if it’s certain types of superannuation payments.

If you and your employer agree that you’ll pay the money back, but you don’t follow through with the agreement, the extra payment can still be treated as an unrepaid PAYE income overpayment.

This law also applies to PAYE intermediaries, which are companies that handle payroll for employers.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS192761.

Topics:
Money and consumer rights > Taxes
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Part R General collection rules
Employment-related taxes: Types of PAYE income payments

RD 8BTreatment of PAYE-related overpayments

  1. This section applies when an employer pays an amount (a PAYE-related overpayment) to an employee and—

  2. the amount is paid—
    1. in error, to the extent to which the employee is not beneficially entitled to the amount; or
      1. as an advance payment, to the extent to which the employee does not become beneficially entitled to the amount; and
      2. the amount is, at the time of payment, treated by the employer as all or part of—
        1. a payment of salary or wages; or
          1. an extra pay; or
            1. a schedular payment.

            2. To the extent to which the amount is an unrepaid PAYE income overpayment, the amount is treated as follows:

            3. as salary or wages, if the amount is treated as described in subsection (1)(b)(i):
              1. as all or part of an amount of extra pay, as applicable, if the amount is treated as described in subsection (1)(b)(ii):
                1. as all or part of a schedular payment, as applicable, if the amount is treated as described in subsection (1)(b)(iii).

                  1. An unrepaid PAYE income overpayment—

                  2. means an amount that—
                    1. is a PAYE-related overpayment; and
                      1. has not been repaid to the employer; and
                        1. is not repayable to the employer by the employee under an agreement between them; and
                          1. is not recoverable under section 248 of the Accident Compensation Act 2001; and
                          2. does not include an amount of exempt income.

                            1. For the purposes of subsection (3)(a)(iii), an amount that is repayable to the employer by the employee under an agreement (the agreement) between them is treated as an amount that is not repayable to the employer by the employee under an agreement between them if—

                            2. the employee breaches the agreement and does not remedy the breach within 2 months:
                              1. the employer considers that the employee will not comply with the agreement in the future.

                                1. An amount referred to in subsection (1) does not include—

                                2. an amount that is income of the employee under section CB 32 (Property obtained by theft):
                                  1. an amount that is an overpayment of a benefit or grant referred to in section RD 5(6)(a) to (c):
                                    1. an employer’s superannuation contribution other than an overpayment of an amount of an employer’s superannuation cash contribution that an employee chooses to have treated as salary or wages under section RD 68 (Choosing to have amount treated as salary or wages).

                                      1. In this section, employer includes a PAYE intermediary.

                                      Notes
                                      • Section RD 8B: inserted, on , by section 255 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).