KiwiSaver changes for employers

From 1 April 2009

What has changed?

• The minimum employee contribution rate is now 2% of a member's gross pay.
• The compulsory employer contribution (CEC) is now 2%. This will no longer increase in future years.
• Any voluntary employer contributions you make will be liable for employer superannuation contribution tax (ESCT).
• The employer tax credit (ETC) has been removed.
• The KiwiSaver Act has been amended and the Employment Relations Act amendment relating to KiwiSaver has been repealed. This means that KiwiSaver employer contributions must now be paid in addition to an employee's gross salary and wages, unless you agree otherwise with your employees, through good faith bargaining.

New minimum employee contribution rate

The 2% contribution rate will apply from any pay day from 1 April onwards.

Existing employees

You'll need to reduce the amount that existing employees contribute to KiwiSaver if they ask you to.

You can do this through your payroll provider or through your payroll system. Ask your employees for written confirmation - they can complete a new KiwiSaver deduction form (KS2) or write to you. There is no need to contact us.

New employees

Deduct a default rate of 2% from the gross pay of new employees who:

• join, and
• are automatically enrolled after 1 April 2009, and
• don't tell you how much they want deducted from their pay.

New compulsory employer contribution

You need to ensure that your employer contribution is at least 2%. You'll no longer be required to contribute more than this amount in future years unless you want to.

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new rate	first full pay period starts and ends after 1 April 2009.
old rate	pay periods span 1 April 2009.

Voluntary employer contributions and employer superannuation contribution tax

If you make any voluntary employer contributions to your employees' KiwiSaver accounts, you'll need to pay employer superannuation contribution tax (ESCT) on the voluntary portions.

Voluntary employer contributions

Voluntary employer contributions include any contributions you make:

• over and above the compulsory employer contribution rate
• to employees aged under 18 or over 65 years (and who have been a member for more than five years)
• to employees on a contribution holiday, or
• to employees who are on leave without pay.

Employer superannuation contribution tax (ESCT)

ESCT can be taxed in one of the following ways:

• at a flat rate of 33 cents in the dollar, or
• at an optional ESCT rate based either on:
  • the annual gross salary or wages plus gross employer contributions paid to the employee in the previous standard tax year (where the employee was employed for all of that year), or
  • an estimate of the total amount of gross salary or wages plus gross employer contributions that the employee will earn in the year ahead (where the employee was not employed for all of the previous tax year), or
• as salary or wages - as long as you have the agreement of your employee.

ESCT must be paid to us along with PAYE deductions on the Employer deductions (IR345) form.

ESCT is not included on the Employer monthly schedule (IR348). The amount shown as total KiwiSaver employer contributions on the EMS is the net amount - the gross employer contribution less ESCT.

Already contributing more than 2%?

If you've already chosen to contribute more than 2% into your KiwiSaver employees' accounts and would like to reduce that contribution back to the new compulsory employer contribution rate of 2%, you may need to re-negotiate contractual arrangements with your employees.

Employer tax credit

The employer tax credit (ETC) you were receiving from the Government has been removed from 1 April 2009.

ETC is claimable as normal for the month of March 2009 regardless of when the pay period ends. For March, ETC is the amount of employer contributions returned in March or $88.57, whichever is smaller.

ETC is not claimable for the month of April 2009.

Employer tax credit square-up

The square-up was proposed to ensure all employers receive their full $20 a week ETC entitlement for the year ending 31 March 2009.

The square-up proposal is currently included in a bill that is before the Finance and Expenditure Committee - no decision has been made yet. The Minister of Revenue has made a recommendation to the Finance and Expenditure Committee that the proposed square-up no longer goes ahead given the:

• recent repeal of the employer tax credit, and
• compliance costs associated with doing the square-up for one year.

Updated KiwiSaver information

The KiwiSaver and Inland Revenue websites have been updated.

All our KiwiSaver publications will be updated and available online during the first week of April.

Forms and guides

If you're unsure whether the information you're giving employees is up to date you can check our KiwiSaver website, and:

• print up to date KiwiSaver forms and guides from the website, or
• order printed copies by calling 0800 257 773.

Need more information?