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Employer Superannuation Contributions Tax (ESCT) calculations

ANSWER ID:35131

Within Payroll, the ESCT rate will calculate differently depending on your employee's start date.

 

Employed for the full previous tax year

If the employee's start date is prior to the start of the last financial year, the ESCT rate will be based on the sum of the employee's Gross Earnings and Gross Employer Contributions for the prior year.

In other words, in the April 2014 to March 2015 tax year, the ESCT rate will be based on the employee's April 2013 to March 2014 earnings.

Employed for part of the previous tax year

If the employee's start date is during the last financial year, the ESCT rate will be based on the actual earnings (Gross Earnings and Gross Employer Contributions) from the previous year annualised to estimate an annual earnings threshold.

In other words, if the employee started in August 2013 and worked 8 months of the 2013/2014 year, their calculation would be (actual earnings/8)x12 = ESCT threshold.

Employee starting during the current financial year

If the employee's start date is during the current financial year, the ESCT rate will be estimated based on the current pay (Gross Earnings and Gross Employer Contributions) annualised and pro-rated for the proportion of the year that they will be employed. In other words, if the employee starts work in August 2013 it is estimated they could work 8 months of the 2014/2015 year, their calculation is based off the gross earnings of the current pay annualised for the portion of the year they will be employed.

If you are adding existing employees to a new MYOB Payroll company file you can enter historical information by going to the Tools menu and choosing Enter History. This provides a means for the system to calculate ESCT accurately even if the system does not have a complete record of actual pays.

How can the ESCT rate calculation be checked?
The ESCT rate calculating on an employee's pay can easily be checked by clicking Super within the employee's pay as shown below.
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This example shows an employee that earns $1400 per fortnight ($37440 p.a.) which puts them in the earnings bracket of $16,801 - $57,600. The ESCT rate for this earnings bracket is 17.5%.

When the Super information is viewed by clicking Super you can see that Payroll is correctly calculating this rate and the ESCT required.
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Full details of the ESCT rates applicable for the current financial year are available from the IRD website.
What if my employee's earnings fluctuate?
The following information is only applicable for employees who started work in the current financial year.

There may be situations where an employee's earnings are highly variable or there is insufficient historical data to make an accurate calculation. In these cases you can override the ESCT Calculated option and select an appropriate ESCT rate based on your own estimation.

Using the ESCT Repayment threshold table below, establish the annual earnings bracket the employee(s) would fall into.
For the latest rates and thresholds, visit the IRD website .

Once the correct ESCT rate has been established, the ESCT rate can then be changed for the employee from Calculated to the required rate.

Carry out the change to the ESCT rate within the Employment Details tab of the Maintain Employees window as shown in the example below.

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Once you have changed the ESCT rate from Calculated to the required rate, you must make sure that you update the ESCT rate based on the IRD rules when a new tax year begins.

What if ESCT is not calculating?

ESCT may not be calculating because you have no earnings entered for the pay at the point you checked the ESCT. Enter earnings before checking the calculation.

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