myIR, payments and more
Employer superannuation contribution tax
A transcript of the "Employer superannuation contribution tax" video.
The video opens with Inland Revenue's logo. Then the title of the video "Employer Superannuation Contribution Tax (ESCT)" appears. We see an employer (Jennie), and a question mark pops up to the left. The question mark is replaced with the KiwiSaver logo, and "ESCT" appears in a circle to the right of the screen. At the end of this scene, the ESCT circle moves to cover the KiwiSaver logo.
"Employer superannuation contribution tax (ESCT). Are you an employer? If you make contributions to an employee's KiwiSaver account, you'll need to pay employer superannuation contribution tax (ESCT). ESCT is a tax deducted from the employer contributions you pay into the employee's KiwiSaver account."
The figure "3%" appears in a circle next to Jennie. Next, the 3% is replaced in the circle by "ESCT", and the circle moves off-screen, indicating payment to Inland Revenue. To the right, we see the words "Other schemes" appear in a circle. This circle then moves off-screen and Inland Revenue's web address drops down from the top of the screen.
"Employer contributions are compulsory, and the minimum amount you need to pay is 3% of the employee's gross salary or wage."
"You pay ESCT to Inland Revenue along with your PAYE and other employer deductions."
"ESCT is also paid on employer contributions to superannuation schemes other than KiwiSaver. Inland Revenue's website has more information about these other schemes."
We see Jennie and her four employees under a sign reading "Salon Jennie". A calendar showing "1 April" drops into view. The camera zooms into Daniel, who is then shown giving a customer a haircut.
"Jennie owns a busy hairdressing salon in town. All four of her employees belong to KiwiSaver."
"At the beginning of the tax year, Jennie works out the ESCT rate for each of her employees. She starts with senior stylist Daniel."
A calendar showing a year running from April to March appears. Then we see a table of ESCT rates. The table is minimised, dropping to the bottom of the screen. Daniel's salary of $65,000 appears, and the employer contribution of $1,950 pops in underneath, giving a total of $66,950. The table expands from the bottom of the screen, and the salary range applicable to Daniel is highlighted to indicate his ESCT rate of 30%.
Next, the table fades away and we see Daniel next to his ESCT rate of 30%, and a calendar showing the full tax year. Then the months April to September are greyed out, indicating a part year. All images disappear to be replaced with Inland Revenue's web address.
"Last year, Daniel worked at the salon for the full 12 months. That means Jennie can use his last year's salary to work out his ESCT rate for the coming year."
"Here's the table of ESCT rates. Daniel's salary for last year was $65,000. Jennie's 3% KiwiSaver employer contribution of $1,950 added to his salary gives a combined figure of $66,950, making Daniel's ESCT rate 30% of the employer contribution."
"Jennie will use this rate for Daniel for the whole of the coming year."
"If your employee wasn't with you for all 12 months of the previous year, you work out the ESCT rate based on what you estimate or expect their salary and your contributions will be for the coming year. Please visit our website for more information."
Jennie's four employees are shown, with their salaries appearing underneath. Each person is allocated their own ESCT rate. All employees disappear except Daniel, who is shown alongside his weekly salary of $1,250. Jennie's employer contribution of $37.50 slots in underneath. The cents wind back from "50" to "00" and Daniel's ESCT of $11.10 appears at the bottom of the screen.
Finally, we see only the employer contribution of $37.00 and the ESCT of $11.10. The cents reappear, restoring the employer contribution to the original $37.50, and the ESCT is deducted giving a net employer contribution of $26.40. The employer contribution figure disappears, leaving the two key figures: ESCT and net employer contribution.
"Jennie has both full-time and part-time employees who earn different salaries. This means they each get their own ESCT rate."
"Let's see how Jennie calculates Daniel's ESCT every payday."
"Daniel's salary for the week is $1,250. That means Jennie's employer contribution is $37.50. ESCT is a tax on the employer contribution. For the purpose of calculating ESCT, you use whole dollars only. Jennie removes the cents and applies Daniel's ESCT rate of 30%."
"She must pay ESCT of $11.10."
"Jennie needs to calculate one more figure: the net employer contribution. That's easy. All she does is deduct the ESCT from the employer contribution including the cents."
"Jennie must include both of these figures in her employer returns."
We see a wage summary template and a PAYE calculator, which are joined by the image of a person representing a PAYE intermediary.
These images disappear, except for the calculator, which now displays "ESCT". Then the calculator is replaced by Inland Revenue's web address.
"You don't have to work out your ESCT manually. Why not do it the easy way? Here are two tools that can help. Alternatively, a PAYE intermediary could also help you. To check these out, click on the links under the video."
"You've just seen how most employers calculate their ESCT. There's another method you can use, which taxes the employer contributions under the PAYE rules. Please visit our website for more information."
The Inland Revenue web address slides off-screen to the right, bringing us back to the ESCT and net employer contribution figures. These figures disappear and we then see Jennie standing next to a table showing the weekly net employer contribution and ESCT for Daniel. All four of Jennie's employees and their weekly figures then appear in the table. The table header then changes from weekly to monthly and the weekly figures are changed into monthly figures. The total net employer contributions ($313.16) and ESCT ($84.16) for the month are highlighted.
"Meanwhile, back at the salon, Jennie has worked out ESCT for all her employees. Jennie takes the figures for each of her employees' weekly pays and totals these up for the month. Remember the two figures she needs for her employer returns? The net employer contribution and ESCT. She adds everything up."
The IR348 Employer monthly schedule and the IR345 employer deductions form appear as icons. We zoom in to the IR348 icon which takes us to an image of the real IR348. The net employer contribution of $313.16 is transferred to Box 7.
Then we zoom in to the IR345 icon which takes us to an image of the real IR345. The net employer contribution of $313.16 is added to Box 7 and the ESCT of $84.16 goes to Box 8.
Finally, we see the IR348 and IR345 icons alongside each other again. Each form is flanked by boxes numbered 3 to 7. An additional "Box 8" appears beside the IR345. Both forms receive a tick. The icons then moves upwards off-screen.
"ESCT is paid to Inland Revenue along with your employer deductions. First, Jennie completes her Employer monthly schedule."
"She enters her total net employer contributions in Box 7."
"Next, Jennie completes her Employer deductions form. She enters her total net employer contributions in Box 7 and her total ESCT in Box 8. Finally, Jennie checks that Boxes 3 through to 7 contain the same figures on both forms. She knows however Box 8 only appears on the IR 345 Employer deductions form."
"And that's all there is to it!"
A circle showing "Due date" appears. Then we see a computer screen and cursor representing Inland Revenue's ir-File service.
A new screen appears and we see Inland Revenue's contact phone number. Below this, Inland Revenue's web address appears with the words Businesses & Employers section, PAYE calculator and Tool for Business appearing below it. The final bullet point appears advising you to contact your tax agent or PAYE intermediary.
The final scene shows Inland Revenue's logo, the ESCT website, and the New Zealand Government logo.
"Please remember you must file both returns, and pay your ESCT and other employer deductions by the due date. Inland Revenue's ir-File service makes the job a whole lot easier. Check out the link under the video."
"Are you behind with your ESCT? Made a mistake? Phone us on 0800 377 772. Our friendly team can help you get back on track."
"If you need more information, go to the Business and Employers section on our website where you will find the PAYE calculator. The Tool for business also has a handy electronic wage-book you can download, and a lot of information about all aspects of payroll."
"Your tax agent or PAYE intermediary can also advise you about ESCT, and help you choose the calculation method that's right for your business."