141EDPenalty for unpaid amounts of employers’ withholding payments

1. A taxpayer is liable to pay a shortfall penalty (the employers’ withholding payment penalty) if—

2. the taxpayer—
   1. provides employment income information to the Commissioner under subpart 3C; and
   2. is required to pay to the Commissioner an amount of tax (the required amount) under section RD 4(1) of the Income Tax Act 2007; and
   3. fails to pay some or all of the required amount (the unpaid amount) to the Commissioner by the due date; and
3. the Commissioner, after the due date for the payment of the required amount, gives the taxpayer notice (the Commissioner’s notice)—
   1. that the taxpayer is liable to pay a penalty for failing to pay the unpaid amount by the due date and of how the penalty is calculated; and
   2. of the circumstances in which further penalties will be imposed and of how a further penalty will be calculated; and
   3. of actions that the taxpayer may take to avoid the imposition of further penalties; and
4. subsection (3) does not apply to the taxpayer.

5. This section and sections 139A and 139B (which relate to late filing and late payment penalties) do not apply when a non-resident employer incorrectly concludes that they do not have to withhold and pay, or pay, an amount of tax for an amount of tax for a PAYE income payment to a cross-border employee to the Commissioner in an income year, if the employer—

6. has either 2 or fewer employees present in New Zealand during the income year or pays $500,000 or less of employment-related taxes for the income year; and
7. has, within 60 days of a relevant failure to withhold and pay, or pay, taken reasonable measures to manage their employment-related tax obligations.

8. Before giving to the taxpayer the first Commissioner's notice in relation to the required amount, the Commissioner must give to the taxpayer a notice that a penalty may be imposed under this section if the unpaid amount is not paid.

9. A taxpayer is not liable to pay an employers’ withholding payment penalty in relation to an unpaid amount if—

10. the taxpayer is a receiver or liquidator—
    1. appointed after the end of the month in which the employment income information is provided to the Commissioner; and
    2. having insufficient funds available to pay the unpaid amount:
11. during the period, the taxpayer is negotiating an instalment arrangement with the Commissioner to pay the unpaid amount:
12. the taxpayer—
    1. agrees with the Commissioner, before the penalty date under subsection (4) for the due amount, to an instalment arrangement (the instalment arrangement), of the same type as an instalment arrangement referred to in section 177B, to pay the unpaid amount; and
    2. pays the unpaid amount under the instalment arrangement.

13. An employers’ withholding payment penalty payable in relation to an unpaid amount has a due date (the penalty date) that is—

14. the date of the Commissioner's notice, if the penalty is the first penalty in relation to the required amount; or
15. 1 month after the penalty date for the preceding penalty, if paragraph (a) does not apply.

16. The amount of the employers’ withholding payment penalty in relation to an unpaid amount is—

17. 10% of the unpaid amount on the day before the penalty date, if the taxpayer—
    1. fails to agree to an instalment arrangement with the Commissioner before the day that is 1 month after the penalty date; and
    2. fails to pay the unpaid amount before the day that is 1 month after the penalty date; or
18. 10% of the unpaid amount on the day before the penalty date, if the taxpayer—
    1. agrees to an instalment arrangement with the Commissioner before the penalty date; and
    2. fails to comply with the instalment arrangement before the day that is 1 month after the penalty date; or
19. 5% of the unpaid amount on the day before the penalty date, if—
    1. the taxpayer pays the unpaid amount, or agrees to an instalment arrangement with the Commissioner, after the penalty date and before the day that is 1 month after the penalty date; and
    2. paragraph (b) does not apply.

20. For the purposes of subsection (5), if the required amount is varied or corrected by the taxpayer or the Commissioner in the period that starts on the date when the employment income information is provided to the Commissioner and ends on the day before the penalty date, the amount of the penalty that relates to the unpaid amount is based on the varied or corrected amount.

21. An amount paid by the taxpayer or applied by the Commissioner on account of the taxpayer in relation to the taxpayer's liability to pay unpaid tax and a penalty under this section must first be applied towards payment of the penalty.

22. A taxpayer may be liable to pay more than 1 employers’ withholding payment penalty arising from the employment income information.

23. The maximum amount of penalties under this section that may be imposed is 150% of the required amount that is unpaid when the first penalty is imposed under this section.

24. If the penalty date for a penalty would, in the absence of this subsection, be a date in a month that does not exist in the month, the penalty date is the date of the last day in the month.