In association with
Employing your spouse or partner
If you’re doing business as a sole trader or partnership, you need to let Inland Revenue know if you employ your spouse or de-facto partner, so that you can claim a deduction for the wages you paid to them.
Everyone you employ needs a written employment agreement.
You must do it by law, and it’s a great foundation for an employment relationship. Our new Employment Agreement Builder(external link) will help guide you through the steps to create a proper agreement.
If your business is a registered company
As one of your employees, you have the same tax and employment obligations to your spouse or partner as to anyone else. That means you’ll need to:
- have a signed employment agreement
- provide minimum employment rights, including leave, minimum wage and regular breaks
Minimum rights of employees(external link) — Employment New Zealand
- pay ACC levies for them
- deduct PAYE
- make contributions to their KiwiSaver.
Case study
Extra pair of hands
Tony runs a bakery next to an industrial area of Auckland. When a new tyre factory opens down the road, his sales double. To keep up with demand, Tony’s wife Carol pitches in to help serve customers during the lunch rush. After a week, Tony realises he’s making enough money to start paying Carol a wage for the hours she puts in at the bakery.
Next month, Tony’s accountant calls. He wants to know why Tony’s wage bill is higher. When he finds out about Carol, the accountant tells Tony he’ll have to make sure everything is above board.
Carol must have the same employment and tax benefits and obligations as his other employees, including a signed employment agreement. Fortunately, Tony has already been deducting PAYE from Carol’s wages, so can give his accountant the correct figures for the month’s employee monthly schedule.
Tony also needs Inland Revenue’s (IR) approval to claim Carol’s wages as an expense in his tax return — he must contact IR with enough information to show her wages are genuinely paid for work done for Tony’s business.
While it’s a bit of a hassle, Tony is happy he won’t be penalised by IR in the future.
If you’re a sole trader or operating in a partnership
You’ll need to get approval from Inland Revenue to pay your spouse or partner wages – otherwise you can’t claim a deduction for these in your business accounts.
You need to let Inland Revenue know:
- the type of business your spouse or partner will be employed in
- what work they’ll do for you
- the average numbers of hours they’ll work each week, and how many weeks a year
- how you’ll pay your partner
- how much they’ll be paid
- details of your other employees, including how much in total you pay them.
You need to make another application to Inland Revenue if you increase your spouse’s or partner’s wages for any reason other than a standard pay rise, e.g. increasing their duties or their hours.
Further information is available in the IR335 Employers’ Guide section on the Inland Revenue website.
Deductions from salary and wages (IR335)(external link) — Inland Revenue
Benefits and obligations
Your partner has the same benefits and obligations as any other employee.
Get detailed information about employment rights and responsibilities(external link) on the Employment New Zealand website.
