How do I know what ESCT rate to use?
Employer superannuation contribution tax (ESCT) is deducted from your employer contributions to your employees’ KiwiSaver or complying funds.
Complying funds are superannuation schemes with similar rules to KiwiSaver. For example, members’ savings are locked in until they’re eligible for NZ Superannuation.
You do not pay ESCT if your employee asks you to deduct money from their pay to put into a superannuation scheme. These are not employer contributions.
There are 2 ways to deduct ESCT:
- you deduct ESCT from each employer contribution.
- your employer contribution is included in your employees’ gross salary or wage. Tax is deducted under the PAYE rules.
If you make employer contributions to your employee’s superannuation fund (such as KiwiSaver or a complying fund) you need to deduct Employer superannuation contribution tax (ESCT) before passing the payment on. You need to work out the ESCT rate for each employee. You do not need to know how much an employee earns in any other jobs they may have.
On this page it gives you option to work out ESCT based on:
- The whole tax year
- Part of the tax year
- They started this tax year
Work out your employee’s ESCT rate
How your employee’s ESCT rate is worked out depends on how long they have worked for you.
How much of the last tax year (1 April to 31 March) did your employee work for you?
To work out the ESCT rate, you need to estimate and add together:
- the employee’s total salary or wage (before tax) for the current tax year
- your total employer contributions (before tax) you’ll make to their superannuation scheme for the current tax year.
How much is your employee’s estimated total salary or wage and employer contributions for this tax year?
This tool on the IR website will provide what rate ESCT should be based on.
Information curtesy of the IR website