KiwiSaver: employer tax credit (ETC)
Employer tax credit (ETC) claims and pay periods
Listed below are some common scenarios which have caused confusion in the past.
Weekly pays
Example - 4 pay weeks in the month
The PAYE period ending 30 April 2008 has 4 pay weeks.
The employer contributes $20 a week.
The total ETC that can be claimed for this particular employee is:
$20 x (30/7) = $85.71.
Example - 5 pay weeks in the month
The PAYE period ending 31 May 2008 has 5 pay weeks.
The employer contributes $20 a week
The total ETC that can be claimed for this particular employee is:
$20 x (31/7) = $88.57.
Fortnightly pays
Example - 2 fortnightly pays in the month
The PAYE period ending 30 April 2008 has 2 fortnightly pays.
The employer contributes $40 a fortnight.
The total ETC that can be claimed for this particular employee is:
$20 a week x (30/7) = $85.71.
Example - 3 fortnightly pays in the month
The PAYE period ending 31 May 2008 has 3 fortnightly pays.
The employer contributes $40 a fortnight.
The total ETC that can be claimed for this particular employee is:
$20 a week x (31/7) = $88.57.
Leave and pay in advance
Example - getting paid 3 weeks' leave in advance
An employee works and is paid for the first 4 weeks in December 2008, and then goes on leave for 3 weeks. If the 3 weeks' leave is paid in advance, the employer contributions for December 2008 will be 7 weeks' worth, and January 2009 will only be 2 weeks.
| Month | CEC calculation $20 per week of pay |
Maximum ETC $20 a week x 31/7 |
ETC claimable |
|---|---|---|---|
| Dec 2008 | $20 x 7 = $140 | $88.57 | $88.57 |
| Jan 2009 | $20 x 2 = $40 | $88.57 | $40.00 |
Starting or finishing employment part way through a month
ETC is not reduced if an employee starts or finishes part way through a month.
Example - starting employment part-way through a month
An employee starts on 10 April.
They receive $200 of KS employer contributions for the 21 days employed.
The ETC claim for that employee for April is:
$20 a week x (30/7) = $85.71.
Leap years
In leap years, when February has 29 days, the maximum ETC claim per employee for February is:
$20 a week x (29/7) = $82.86.
Therefore, the maximum annual ETC claim for a leap year is:
$20 a week x (366/7) = $1,045.71.
ETC claims and Employer deductions (IR345) returns for large employers
Adjusting an ETC claim using the second Employer deductions (IR345) return
If an employee is a wage worker for one week and then becomes a salary worker, for example, by promotion, the maximum ETC amount can still be claimed for the month.
Example - employee becomes a salary worker
If $15 was paid in employer contributions for the week that was paid in wages, then the total ETC claim for the month is:
$20 a week x (30/7) = $85.71.
The first IR345 return will show the $15 ETC.
The second IR345 return will show an ETC of $70.71 ($85.71 - $15.00).
Deferring an ETC claim from the first Employer deductions (IR345) return
For employers who file IR345 returns twice a month, the ETC claim can be split across both the return covering:
- the 1st - 15th, and
- the 16th until the end of the month.
However, employers can defer their claim on the 1st - 15th return and make a claim for the month's full amount on the return for the 16th - end of the month.
Due dates for Employer deductions (IR345) returns
| For pays from the ... | the return is due by the ... |
|---|---|
| 1st - 15th of the month | 20th of the same month. |
| 16th until the end of the month | 5th of the next month. |
Large employers using one IR345 return per month
For large employers who have arranged to file one IR345 per month, a full ETC claim can be made on that return for the whole month.
Example - employer only files the first IR345 return
If an employer pays all of their salaries before the 15th of the month and only submits the first IR345 return, they claim the full month's ETC claim per employee on the first return, and do not submit a second return.
Date published: 21 Jul 2008
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