The changes would be optional from April 1, 2018 and mandatory from April 1, 2019.
The focus was a push to have employers completing their reporting obligations on a payday by payday basis rather than the current filing of employee monthly schedules that aggregate information from several pay periods, he said.
The threshold for mandatory electronic reporting was being reduced from $100,000 of PAYE and employer superannuation contribution tax per year to $50,000.
For small employers under the threshold, a paper return would be available and would need to be received seven working days after the relevant payday occurred.
"Overall, the changes should largely be positive and reduce the time and effort required to complete their compliance obligations."
Using payroll software was the norm for most small businesses and cloud-based packages made it affordable for most employers to use software, Mr Stevenson said.
The rules would not be onerous for the majority of employers.
Smaller employers who did not want to use software would spend more time and effort than they currently did on compliance, especially if they had weekly pays. Some might move to monthly pay periods.
BusinessNZ chief executive Kirk Hope said the move would mean reducing the number of times businesses must communicate with Inland Revenue. Businesses would welcome the reduction but some enterprises at present had a benefit in retaining PAYE and related deductions as working capital until it must be paid to Inland Revenue. Filing electronically on payday would mean the time use of money would be lost.
"In this case, a smoother overall tax compliance procedure will probably more than offset the loss of ability to use money or interest involved as cash flow."
Recent payroll software problems in some government agencies pointed to the need for meticulous implementation, Mr Hope said.
More work needed to be done on issues such as how information might be updated or corrected, when necessary, in an electronic format.
"BusinessNZ supports the move in principle, subject to scrupulous management of the change."
Mr Stevenson said other changes included optional treatment for lump sum payments such as holiday pay in advance, having PAYE calculations based on the period it related to rather than it being treated as an extra pay.
"This is a welcomed change that addresses one of the many situations resulting in employees being overtaxed — a factor leading to the tax refund industry being so prominent."
Inland Revenue consulted on options for secondary tax codes earlier this year but no changes were proposed in the latest announcements, he said.
There had to be a solution allowing a more accurate rate to be applied to secondary earnings, to overcome another potential avenue of over-taxation and avoid the need to seek a refund year after year, he said.
At a glance
• PAYE paid on payday basis
• Threshold for mandatory electronic reporting halved to $50,000
• Changes should reduce compliance for employers
• BusinessNZ warns the changes need to be perfectly implemented
