Deductions from salaries and wages: Superannuation fund contributions
Taxing superannuation fund contributions
Any contribution an employer makes to a superannuation fund for the benefit of an employee is liable for tax.
What are superannuation contributions?
The term "superannuation contributions" has a specific meaning in this context. It covers any contribution to a superannuation fund paid by the employer for the employee's benefit (a superannuation fund is a scheme that has been registered under the Superannuation Schemes Act 1989).
If an employee asks an employer to make deductions from their wages and pay them into a superannuation scheme, these are not superannuation contributions.
How to tax
Employer superannuation contribution tax (ESCT), formerly specified superannuation contribution withholding tax (SSCWT), can be taxed in one of the following ways:
- at a flat rate of 33 cents in the dollar, or
- an optional ESCT rate based on either:
- the annual 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 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).
Under this option the ESCT rate for contributions from 1 April 2007 to 30 September 2008:
| with salary and wages totalling ... | were |
|---|---|
| $0 to $11,400 | 15% |
| $11,401 to $45,600 | 21% |
| $45,601 and up | 33% |
and the ESCT rate for contributions from 1 October 2008 to 31 March 2009:
| with salary and wages totalling ... | were |
|---|---|
| $0 to $16,800 | 12.5% |
| $16,801 to $48,000 | 21% |
| $48,001 and up | 33% |
and the ESCT rate for contributions from 1 April 2009 to 31 March 2010:
| with salary and wages totalling ... | will be ... |
|---|---|
| $0 to $16,800 | 12.5% |
| $16,801 to $57,600 | 21% |
| $57,601 and up | 33% |
or
- treat your employer contribution as salary or wages, for which you'll need the agreement of your employee.
Employer contributions exempt from ESCT
Compulsory employer contributions to KiwiSaver schemes and complying funds are exempt from employer superannuation contribution tax (ESCT). From 1 April 2009 the compulsory employer contribution rate is 2% of the employee’s gross salary or wages.
Any voluntary employer contributions to KiwiSaver schemes are subject to ESCT. Voluntary employer contributions include 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.
ESCT must be paid to Inland Revenue 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.
For examples of paying ESCT on KiwiSaver contributions, see our News and updates article.
Complying funds
The ESCT exemption also applies to compulsory contributions made 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).
Date published: 24 Mar 2009
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