Making deductions
Note
Personal tax rates are changing from 1 October 2008 and you can find out more about these changes in News and updates. You should start using the new PAYE rates for pay periods that end on or after 1 October. KiwiSaver contributions are not affected by these changes so please continue to make these deductions in the same way from 1 October.
Employers play an important role in the KiwiSaver initiative by calculating employees' contributions, deducting the correct amount from their pay, and forwarding it to us. From 1 April 2008, you will also have to contribute to your employees' KiwiSaver account.
Contribution rates
Employees can choose a contribution rate of either 4% or 8% of their gross pay. With your agreement, employees can choose a transitional rate allowing for employer contributions to count towards the employee's minimum contribution rate of 4%.
Gross pay means total salary, including:
- bonuses
- commission
- extra salary gratuity
- overtime, and
- any other remuneration of any kind before tax
but (from 1 April 2008) excluding:
- redundancy payments, and
- overseas living costs.
This means that compulsory employer contributions are not required for the excluded salary components.
Note
The definition of gross salary or wages is different for contributions to complying funds as it is calculated on base salary or wages which may include:
- bonuses
- commissions, or
- any other kind of remuneration before tax
if these are set out in the fund's trust deed.
If an employee elects any other rate on their KiwiSaver deduction form (KS2), or does not select a rate, make deductions at the default rate of 4%.
Employees can:
- make lump sum contributions through us or direct to their scheme provider
- change between the two contribution rates (4% or 8%) by advising you of their new contribution rate.
Employees can't:
- change their contribution rate more frequently than every three months unless you agree.
Scheme providers may offer other services for members, such as life insurance. Payment for these services must go direct to the scheme provider, and cannot count towards the KiwiSaver contribution rate.
Employer contributions
The level of the compulsory employer contribution will be phased in over four years. Employers are required to start contributing at 1% of their employee's gross salary or wages from 1 April 2008, increasing by 1% every year to reach a maximum of 4% from 1 April 2011.
Contributions made to existing superannuation schemes count as compulsory employer contribution if certain conditions are met.
An employer tax credit of up to $20 a week per employee is available to help offset the cost of making compulsory employer contributions.
Calculating deductions
KiwiSaver calculations tables are included in the PAYE deduction tables (IR340 and IR341) to help make it easier for you to work out how much to deduct. The PAYE calculator for 2008 is also available and can be used to calculate members' KiwiSaver deductions. You need to make sure new employees' KiwiSaver contributions and compulsory employer contributions start from their first pay.
Special tax code or deduction rate certificate IR23
Any KiwiSaver contributions that are or will be made from an employee's salary or wages must be in addition to their special tax code or deduction rate. For example, if an employee is on a deduction rate of 30% and they are making KiwiSaver contributions at 4%, total deductions from their salary or wages will be 34%.
Forwarding deductions
Forward member deductions and employer contributions to us along with your Employer monthly schedule (EMS) (IR348 and IR349). The EMS and Employer deductions form (IR345) include fields for KiwiSaver employee contributions, compulsory employer contributions and the employer tax credit. These forms can be filed online if you are registered to use our ir-File service. Please make sure you complete all fields on the form.
Deductions from accident compensation payments
If you participate in the Accident Compensation Corporation's (ACC) Partnership Programme or have an ACC employer reimbursement agreement, you continue paying an employee after an accident. In this case, you must continue to deduct any KiwiSaver contributions that were applicable before the employee's accident.
To stop member contributions being deducted from their salary or wages, the employee must apply to us for a contributions holiday. If the employee continues to make contributions, you may choose to continue making employer contributions but you don't have to.
When ACC (and not you) pays the employee weekly compensation, you don't need to make member contributions from those payments unless the employee instructs ACC to make deductions. You also don't need to make compulsory employer contributions, although you may choose to make them.
Contributions made in error
Please let us know if you make an error in deducting contributions or making compulsory employer contributions (after 1 April 2008) from an employee's pay. If necessary, we'll refund any contributions made. If employer contributions are included, these will be repaid to you.
You can amend KiwiSaver information the same way you make Employer monthly schedule amendments, by completing an Employer monthly schedule amendment (IR344) form. If you have a small number of amendments, call us on:
- 0800 377 772, or
- 04 978 0763 if calling by cellphone
and we'll update them over the phone.
Amendments to KiwiSaver information and resulting refunds will take longer to process if we have to request the refund from the member's scheme.
Example 1
Shayne is a member of KiwiSaver. You accidentally deduct member contributions of 8% from his wages when his contribution rate is actually 4%.
$200 has been deducted from his wages to date, which you have sent to us but we haven't paid it yet to the KiwiSaver scheme provider. Shayne contacts us and we refund him the extra $100 that was deducted.
Example 2
Rangi begins a new job and is on a contributions holiday. He has lost his contributions holiday notice so you must make deductions from his salary or wages until he shows you a replacement notice.
Rangi contacts us to get a replacement notice to stop deductions and asks us to refund the deductions made from his new job. We have already paid the deductions to Rangi's scheme provider, so we request them back and then make the refund to Rangi.
Resignation and retirement benefits
Make deductions as normal at either 4% or 8% from the final payment of salary or wages made up for the employee. This means you must make deductions from any salary, wages or allowances you intend to pay, including all bonuses, commission, extra salary, gratuity, overtime pay, extra pay, or other remuneration of any kind.
KiwiSaver has some specific exclusions to the term "salary and wages" where you intend to make ongoing payment to the employee after they retire. One of these relates to periodic payments by way of pension, retiring allowance, superannuation or other allowance or annuity relating to the person's past employment.
To learn more about these exclusions, contact us.
Payroll subsidy
There is a subsidy available to help cover your administration costs. The subsidy is set at $2 per employee per payday. It is payable to listed payroll intermediaries that carry out PAYE and related payroll functions for employers with up to five employees.
Find out more about
- Employees with special circumstances
- Employees exempt from automatic enrolment
- Compulsory employer contributions
- Employer tax credit
Date published: 18 Sep 2008
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