Calculating the ESCT rate for superannuation contributions (New Zealand)

Employer Superannuation Contribution Tax (ESCT) is the tax that the Government places on any superannuation contribution paid by an employer. The rate of the ESCT tax is determined by the employees gross Annual earnings of the previous financial year.

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Prior to 1 April 2012 there was a 2% Employer Superannuation Contribution threshold that allowed employers to make contributions up to 2% without attracting ESCT. After 1 April 2012 this threshold was removed so that all Employer Superannuation Contributions attracted ESCT.

IRD advised how the ESCT tax rate is to be determined as well as how the ESCT should be calculated. As of 1 April 2012, the ESCT rate should be determined by the employee's gross earnings plus employer superannuation contributions in the previous full financial year, i.e. 1 April to 31 March. Any employee who does not have a full financial year of earnings is to use an estimate of their current year's earnings to determine the ESCT rate.

In Exo Payroll a specific ESCT rate can be selected, such as 17.5%, or the Calculated option can be used. If Calculated is selected then EXO Payroll will automatically determine the ESCT rate if the employee has a complete previous financial year but if the employee does not have a complete previous financial year then an estimate of their earnings for the current year should be entered in the 'ESCT Gross Liable' field.

For the calculation of the ESCT on the Employer Superannuation Contributions, the IRD have specified that the ESCT is to be calculated on the whole dollars only, dropping any cents from the contribution.

For example: An employee who is on a weekly pay frequency with a gross pay of $1440 ($74,880 Annual Gross) and with Kiwisaver contributions of 2% for both the employee and employer contributions has $28.80 being made for each contribution ($1497.60 Annual Kiwisaver Employer Contributions). With the Annual Gross pay of $74,880 plus the Annual Kiwisaver Employer Contributions of $1497.60 giving a Total Annual Gross Earnings of $76,377.60, the employee is in the 30% ESCT Tax Bracket and this calculates the ESCT as 30% x $28 = $8.40.

The ESCT figures are reported to the IRD through the IR345 report which is filed either fortnightly or monthly by employers. The IR348 report shows the Net Employer Kiwisaver Contribution figure only for each employee and does not show the ESCT figure for that month at all.

Need more help? You can open the online help by pressing F1 on your keyboard while in your software.

You can also find more help resources on the MYOB Exo Employer Services Education Centre for Australia or New Zealand.