Employer contributions
From 1 April 2009 you will be required to contribute to your employee's KiwiSaver account or complying fund at 2% of their gross salary or wage. A complying superannuation fund is a section within a registered superannuation scheme that has been approved by the Government Actuary as having met certain criteria similar to KiwiSaver, eg KiwiSaver lock-in rules and portability.
KiwiSaver employer contributions need to be paid with your PAYE while contributions you make to your employees' complying funds still need to be paid directly to the applicable scheme.
Eligibility
You need to make contributions if your employee:
- is having KiwiSaver or complying fund member contributions deducted from their salary or wages, and
- is aged 18 and over, and
- has not reached the age of eligibility for New Zealand Super (currently 65), or has not been a member of a KiwiSaver scheme or complying fund for five years, whichever date is later, and
- is not a member of a defined benefit scheme.
How to calculate minimum compulsory contributions
Your employer compulsory contributions must be on top of your employee’s regular pay. This means that if you have agreed to a total remuneration package with your employee, the compulsory employer contributions must be paid on top of that package. Your employee’s take-home pay should not be reduced because you are making a compulsory contribution.
Through good faith bargaining, a salary package under an employment agreement can be negotiated whereby compulsory employer contributions can be offset against the employee’s gross pay.
Compulsory employer contributions must vest in the employee immediately.
2% is the minimum contribution rate from 1 April 2009. You can make additional voluntary contributions if you wish.
Calculating employer contributions
Here's the formula to use if you're not currently contributing to your employees' superannuation:
Payment of gross salary or wages x compulsory rate = minimum employer contribution
For example, if your employee earns $2,600 a month and is a member of, and is contributing to a KiwiSaver scheme, or complying fund, from the first whole pay period after 1 April 2009, the minimum compulsory employer contribution will be:
$2,600 x 2% = $52.00
You only need to pay the compulsory employer contribution if your employee is a member of and is contributing to a KiwiSaver scheme or complying fund.
Employer contributions must be made through us and be accompanied by an Employer deduction form (IR345 ). You must also include payment details on your Employer monthly schedule. These forms can be filed online if you are registered to use our ir-File service. We hold employer contributions until payment is cleared by your bank and then pass them on to the provider.
The Crown does not guarantee employer contributions and one-off payments.
Don't pay member or employer contributions for a complying fund to us. These should be made direct to the scheme provider.
Stopping and starting contributions
For new employees, you start paying contributions from their first pay. For existing employees, you pay contributions from their first pay after either we or the employee notifies you that they have joined a KiwiSaver scheme or complying fund.
You can stop contributions if the employee elects to take a contributions holiday or when we advise you to stop making contributions.
Opt-outs
If a new employee opts out of KiwiSaver, we'll refund you the employer contributions you've made for the employee. The refund will be paid with interest.
Interest effective date on employer contributions
We'll pay interest on employer contributions from the date we receive payment.
Back pay
You must make compulsory employer contributions on backdated payments of salary or wages from which member contributions are deducted.
Short-paid employer contributions
We "pro rata" (divide equally) any short-paid employer contributions received. Balances that are too small to pro rata equally across the total number of employees may be divided at our discretion, provided the same employees do not benefit or lose out in every instance.
This does not prevent the scheme trustee from reallocating contributions on the basis provided for in their trust deed, if it differs from the pro rata calculation we use.
If you short-pay employer contributions for a period, any subsequent payments to make up the short payment will be credited to the same period.
Employer contributions exempt from employer superannuation contribution tax (ESCT)
Employer contributions to KiwiSaver schemes and complying funds are exempt from ESCT.
The exemption applies to employer contributions up to the amount of compulsory employer contribution required to be paid.
Any contributions over the exemption are subject to employer's superannuation contribution tax.
Maximising the exemption from employer superannuation contribution tax (ESCT)
ESCT is payable on employer contributions to a registered superannuation scheme on behalf of an employee.
The Income Tax Act exempts employer contributions from ESCT if the contribution is paid to an employee's KiwiSaver scheme and does not exceed the threshold provided. This creates an incentive to decrease salary in exchange for employer contributions - which will be tax free.
Complying funds
This exemption has been extended to complying funds. A complying fund is a section within a registered superannuation scheme that has incorporated certain KiwiSaver rules - in particular portability and lock-in. Further information can be found in the Tax Information Bulletin Vol 19, No 1 (February 2007).
Additional information
Date published: 24 Mar 2009
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