ESCT FAQs

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.

The trouble is that 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.
  
  

Unless you have a contract which states that you will pay ESCT on top of you employer contributions, then you do not need to.

Your employee is receiving less in their KiwiSaver account because of the ESCT deduction, but there is no obligation for you to take on an additional cost to make up for it. You are still contributing the amount required, and complying with your obligations.

A superannuation contribution must be at least 3% of the employee’s salary or wages.

Non-profit organisations must still deduct ESCT.

The ESCT comes out of the money you would otherwise pay to your employee, so it doesn’t cost you any extra. The tax is, in effect, an employee tax.

In most cases, no. The employer contribution remains the same, but the employee will receive less in their KiwiSaver account because the tax comes out of the employer’s 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 cost is incurred by the employer.