|  |
ESCT - What Is It?
- ESCT is short for Employer Superannuation Contributions Tax.
- It is a witholding tax on superannuation payments made on behalf of an employee.
See Also
ESCT On IRD Monthly Returns
What Is ESCT?
ESCT Calculation
ESCT Tax Rates
IRD Website - ESCT Guide
 | ESCT Payment
|
 | Why should employer contributions not simply be included in gross earnings? Then we could forget about ESCT deductions. |
If employer KiwiSaver contributions were included in employee gross earnings, and then taxed as part of employee income, the additional tax paid would be the same or very similar to the ESCT deducted.
Trouble is employer KiwiSaver contributions are not employee income. They are payments made to a third party on behalf of the employee.
If employer contributions were included in gross income some of the many side effects would be
- ACC Earner Premium would be deducted from the KiwiSaver contribution.
- Student Loan if applicable would be deducted from the employer KiwiSaver contribution.
- Child Support deductions if applicable would be influenced by employer KiwiSaver contributions.
- Holiday Pay would be calculated on employer KiwiSaver contributions.
- Working For Families entitlements would be reduced if employer KiwiSaver contributions were treated as taxable earnings.
| | My employee says the employer should pay the ESCT on top of the employer KiwiSaver contribution. They say it is not fair they are now receiving less in their KiwiSaver account because of the ESCT deduction. What do I say to my employee? |
Your employee has a good point. They are receiving less in their KiwiSaver account because of the ESCT deduction.
Trouble is, you as an employer are still contributing the amount required, and complying with your obligations.
A superannuation contribution is defined as the amount actually paid, plus any ESCT deducted.
Unless there is written agreement to the contrary, you as an employer are complying with your obligations.
See Section RD65 Income Tax Act 2007 for the definition of a superannuation contribution.
| | We are a non profit and therefore tax exempt. Does this mean we don't need to deduct ESCT from the KiwiSaver Employer Contribution as this is a tax? |
Non profit organisations must still deduct ESCT.
ESCT is, in effect, an employee tax. The employers superannuation contribution is the nett contribution that the employee receives plus the applicable tax.
Non profits are not exempt from ESCT - in the same way that their employees are not exempt from PAYE.
| | ESCT is going to result in the Government getting a lot of extra money! Will I need to re-do my budgets because of this extra cost? |
In most cases, no. The employer contribution remains the same, but the employee will get less into their KiwiSaver account because the tax comes off the employers contribution. There is no new cost imposed on the employer.
The only exception to this is if the employer has contractually agreed to pay the ESCT on top of the Employer Contribution. In this case, a real cost is incurred by the employer.
Income Tax Act 2007
Employers superannuation cash contributions
Contribution in money for benefit of employees
(1) An employer's superannuation cash contribution means an employer's superannuation contribution paid in money either to a superannuation fund or under the KiwiSaver Act 2006 to the Commissioner for later payment to a superannuation fund.
Determining amount of contribution
(2) The amount of an employer's superannuation cash contribution is the sum of
(a) the amount of the contribution received by the superannuation fund or, for a contribution paid to the Commissioner under the KiwiSaver Act 2006, received by the Commissioner for payment to the superannuation fund; and
(b) the amount of tax withheld for the employer's superannuation contribution.
More KiwiSaver Information
| 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 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.. | 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.. |
| 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
|
|
|
|
|
|
