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What is a contributions holiday?
KiwiSaver members can take a break from saving after they have been a member for 12 months. This is called a contributions holiday. It can be for a minimum of three months, up to a maximum of five years. There is no limit to the number of contributions holidays a member can take.
An employee transferring from a complying fund to a KiwiSaver scheme can apply for a contributions holiday 12 months from the date the person first joined the complying fund.
To request a contributions holiday, an employee completes a Contributions holiday request (KS6) form and sends it to us.
What action do you have to take?
If we approve your employee's request, we'll ask you to stop making deductions for them. You can also stop deducting member contributions if they show you a valid contributions holiday notice from us. We'll write again asking you to restart contributions when the contributions holiday finishes.
Do you still have to keep paying compulsory employer contributions?
Although you are not required to pay compulsory employer contributions if an employee is taking a contributions holiday, you can, if you choose to, continue to make employer contributions. If you do make employer contributions to employees on a contributions holiday, you'll be liable to pay ESCT on your employer contributions.
Can employees change their minds about their contributions holidays?
A contributions holiday cannot be cancelled once approved, however, members may restart contributions while a contributions holiday is in place. They do this by giving you notice to start or stop making deductions from their salary or wages. Any notice you receive takes effect from the next payment of salary or wages you calculate for the employee.
An employee cannot, however, ask you to start and stop deductions too often. The minimum period before requesting a change, unless you agree otherwise, is three months.
Joyce has been a KiwiSaver member for two years. She applies to Inland Revenue for a contributions holiday. She wants the holiday to apply to both her employers, and she wants to take a contributions holiday for one year.
Inland Revenue accepts Joyce's application and gives notice to you and her other employer to stop deducting member contributions from her wages. At this stage, you can also stop making compulsory employer contributions.
Three months later, Joyce decides that she wants to restart member contributions from the wages she receives from her job with you. She gives you notice to restart deducting member contributions from her wages, and you do this. You must also restart compulsory employer contributions and calculating ESCT.
Close to the expiry of her one-year contributions holiday, Inland Revenue writes to Joyce stating that it is about to end. Joyce doesn't apply for another contributions holiday and Inland Revenue writes to both employers stating that contributions (employee and employer) and ESCT must restart.
What happens if employees lose their holiday notice?
If your new employee is on a contributions holiday but can't show you a valid contributions holiday notice, you still need to deduct contributions from their salary or wages and make employer contributions.
As soon as your new employee shows or gives you a current contributions holiday notice, you may refund any contributions you have deducted that you haven't passed to us. Where you've passed the contributions on to us, the employee should contact us to request their refund.
Hiroshi is taking a contributions holiday and starts new employment with you. He has lost his contributions holiday notice so you begin deducting member contributions, making compulsory employer contributions and deducting ESCT from your employer cash contributions from his first pay.
Hiroshi has had $300 deducted from his salary before he finds the notice from Inland Revenue granting the contributions holiday. He shows you his notice, and you stop contributions.
Because you have already paid the contributions to Inland Revenue, Hiroshi applies to Inland Revenue for a refund. We refund to you the employer cash contributions and ESCT you have made.
Extending a contributions holiday
Members can apply for a new contributions holiday when an existing contributions holiday has less than six months left to run. Applications received when an existing holiday has more than six months to go will not be granted.
We will write to the member one month before their current contributions holiday expires to see if they still want to renew their contributions holiday.
Contributions holidays in the first 12 months
A KiwiSaver member is only eligible for a contributions holiday within the first 12 months if they are suffering, or likely to suffer, from financial hardship.
In these cases, we determine the appropriate length of a contributions holiday - the default period is three months. We may determine a longer period if that is appropriate considering the financial hardship.
An automatically enrolled member who opts out late, and has been a member for less than 12 months, will not be eligible for a contributions holiday. A financial hardship contributions holiday will not be considered unless the member makes an explicit request.