Can I Be An Employee Of My Own Company?
Yes your company can become an employer and employ you via the payroll. This means that each pay day PAYE is deducted from your wages and on the 20th of each month the PAYE get’s paid to IRD. Your wages become a cost to your business. You need to keep a wage book/record of each person’s pay each week – software that does this very nicely is Ace Payroll and can be found at www.acepay.co.nz. We use Ace Payroll at Kiwitax and really like it – easy and affordable. The company will also need to register with IRD as an employer to get this underway.
If you are enrolled in Kiwisaver your company will also contribute 3% of your gross earnings to your Kiwisaver account if you are on the payroll. This is a great way to get a bit of extra tax free money out of your company!
Being on the company payroll can be an easy way to keep on top of your income tax as you’re paying as you go. The downside is you’re paying IRD sooner than you have to. Alternatively you can take drawings from your business but keep in mind you’ll be required to come up with possibly large lump sum payments for your tax. If you choose to go with drawings it can be a good idea to set up a bank account to pay regular amounts into it in anticipation of the lump sum payments – plus you’ll earn a bit of interest along the way. It’s really a six of one, half dozen of the other kind of thing and depends on what you think best suits your situation.