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KiwiSaver Reversals and Refunds

  • Use the Reversals and Refunds Wizard to reverse and optionally refund KiwiSaver deductions to employees that were automatically enrolled, and then opted out of KiwiSaver.
  • This can only be used if the contribution has not already been paid to the IRD.
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  • This routine reverses the KiwiSaver contributions from the PAYE Employer Deductions IR345, and the Employer Monthly Schedule IR348, so they are not paid to the IRD.
  • You are then given a choice of either including the KiwiSaver refund in the employee's pay or handling the refund manually.
  • Either way, the KiwiSaver contribution is reversed off your PAYE return.
Background
  • From 1st July 2007 all new employees are automatically enrolled in KiwiSaver unless they are an exempt employee.
  • These new employees have 8 weeks to opt out of KiwiSaver.
  • Once opted out, the issue remains of what happens to KiwiSaver deductions that may have been made from an employee's pay before they opted out.
  • It is this issue that this document addresses.
Complications
  • KiwiSaver deductions are automatically made from an employee's pay, and these deductions are then included in the payment an employer makes to the IRD with their IR345 Employer Deductions Remittance Certificate.
  • The IR345 payment is made to the IRD either once or twice a month based on the size of the employer, as described in our document Twice Monthly PAYE Returns.
  • The details of the deductions are communicated to the IRD once a month on the Employer Monthly Schedule, using either the Printed IR348 or by using the online IR-File system.
  • Note from the above that deductions are paid to the IRD twice a month, but a summary of totals is only sent once a month.
IRD Specifications
  • The IRD does not allow negative values for any employees on the Employer Monthly Schedule.
  • This means that as soon as the possibly twice monthly IR345 Employer Deductions Remittance Certificate is lodged, an employer has lost any ability to directly refund contributions to the employee.
Recommendation
  • It is Ace Payroll's suggestion that employers are pro-active with regards to new employee membership of KiwiSaver, and check whether an employee wants to opt out of the scheme before their first pay.
  • We suggest this be done when the employee starts, at the same time they sign their employment agreement, and their IR330 Tax Code Declaration.
  • We also suggest employers never directly refund contributions, leaving all refunds to the IRD.
Legislation
  • Section 20 shown below does allow employers to directly refund contributions to employees that have opted out of the scheme.
  • Note this is an option for the employer, and not an obligation.
Section 20 KiwiSaver Act 2006
Effect of opting out

(1) An employee who opts out ceases, on the date on which the opt-out takes effect under section 17(4), to be a member of any KiwiSaver scheme of which the employee might have become a member.

(2) The employer must stop making deductions, with effect on the next payment of salary or wages that the employer calculates,

(a) if the employee opts out by giving the opt-out notice to the employer, after the effective date of the opt-out notice under section 17(4); or

(b) if the employee opts out by giving the opt-out notice to the Commissioner, after the date on which the employer receives notice of the employee opting out under section 19.

(3) The employer may refund any deduction to the employee, rather than pay it to the Commissioner.

More KiwiSaver Information

KiwiSaver Overview
An overview of everything an employer needs to know about KiwiSaver more..
KiwiSaver Employee Setup
KiwiSaver employee setup in Ace Payroll more..
KiwiSaver Pay Calculation
KiwiSaver deductions are fully automated each pay more..
KiwiSaver Automatic Enrolment
Every person that starts a new job is automatically enrolled in the scheme more..
KiwiSaver Exempt Employees
Under 18, over 65, and casual employees are exempted from automatic enrolment more..
KiwiSaver Contribution Rates
All members must contribute 3% of gross wages and may contribute 4% or 8% more..
KiwiSaver Opting Out
An employee has 8 weeks from the start of employment to opt out of the scheme more..
KiwiSaver Opting In
Anyone can opt in to the scheme at any time. Once opted in, an employee can never opt out more..
KiwiSaver Contributions Holiday
All applications for a contributions holiday must be made to the IRD using a KS6 Contributions Holiday request form more..
KiwiSaver Employer Contributions
All employers must contribute 3% for each employee enrolled in KiwiSaver more..
ESCT - What Is It?
A description of Employers Superannuation Contributions Tax and how it is paid more..
ESCT Calculation
ESCT is payable on all KiwiSaver employer contributions more..
ESCT Tax Rates
Employer KiwiSaver contributions are taxed at the top employee marginal tax rate, based on estimated annual earnings more..
ESCT on IRD Monthly Returns
I am doing my monthly return for IRD and the ESCT figure does not show on my IR348 return. What is wrong? more..
KiwiSaver Contributions Report
The KiwiSaver Contributions Report keeps track of contributions, reversals and refunds more..
KiwiSaver Reversals and Refunds
Use the Reversals and Refunds Wizard to reverse and optionally refund KiwiSaver deductions to employees that were automatically enrolled, and then opted out of KiwiSaver more..
KiwiSaver Company Setup
For most employers no company setup is required in Ace Payroll more..
Total Remuneration
Use when an agreed salary package includes KiwiSaver employer contributions more..
KiwiSaver Scheme Providers
The linking of employees to scheme providers does not happen at the payroll end of the process more..
Exempt Schemes
How to disable the deduction of compulsory employer KiwiSaver contributions for employees in exempt KiwiSaver schemes more..
Alphabetical Index
The Ace Payroll alphabetical index provides links to all documentation more..
Ace Payroll FAQ Contents
All the most common Ace Payroll questions grouped by categories in a short table of key words more..
Ace Payroll Frequently Asked Questions
All the most common questions we are asked at Ace Payroll listed in a question format and grouped by category more..

KiwiSaver Forms

image KS1 Employee Details
An employer uses this form to notify Inland Revenue about
  • a new employee being enrolled automatically.
  • an existing employee opting in.
image KS2 KiwiSaver Deductions
An employee uses this form to provide details to an employer if they are
  • starting new employment.
  • an existing employee opting in.
  • a member contribution rate change.
image KS3 Employee Information
An introductory guide for an employee about the KiwiSaver scheme.
KS4 KiwiSaver Employer Guide
A 36 page overview of your KiwiSaver responsibilities as an employer.
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KS6 Contributions Holiday
An employee uses this form to request a contributions holiday.
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image KS10 New Employee Opt Out
An employee uses this form if they have been automatically enrolled and don't want to be a member of KiwiSaver.