Employer superannuation contribution tax (ESCT) refers to the tax that is taken from any cash contributions made to your employees’ superannuation accounts, including KiwiSaver.
The rate of ESCT to deduct can vary for each staff member, making it necessary to ensure that you follow all of the required steps as an employer.
At the beginning of each tax year, you must work out each employee’s ESCT rate, which is calculated based on the employee’s ESCT Threshold. This is the total of the employee’s gross salary or wages, as well as any super contribution paid by the employer to KiwiSaver or another superannuation fund in the previous year.
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 can either:
- deduct ESCT from each employer contribution
- include your employer contribution in your employees’ gross salary or wage. Tax is deducted under the PAYE rules.
For staff members who have worked for you for the entire previous tax year, their ESCT rate will be based on the total salary or wage received, as well as the total employer cash contributions made. If a staff member has only worked for you for a part of the previous year, then their ESCT rates are based on their estimated salary and wages for the current income year, plus your estimated total employer cash contributions.
For the employee’s income for the year ending 31 March, The ESCT rates (from 1 April 2021) are:
- 10.5% for $0 to $16,800.
- 17.5% for $16,801 to $57,600.
- 30% for $57,601 to $84,000.
- 33% for $84,001 to $216,000.
- 39% for 216,001 and above.
Once you know what rate to use for each person, you can then make the deduction each payday from your gross cash contribution to each employee. The total ESCT for all of your staff can then be calculated.
Your ESCT is paid to Inland Revenue on the same due date as Pay As You Earn (PAYE) and other deductions when filing your Employer Monthly Schedule and Employer Deductions forms. These can be filed online through myIR, a more accurate and efficient way to send employee information than paper filing. You should contact your financial advisor for further assistance if you are still unsure of your ESCT obligations.