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Gross Kiwisaver and ESCT deductions

FF
2 Posts
Cover User

Gross Kiwisaver and ESCT deductions

Hi – just using the free 30 day payroll trial. Entered info but having a slight issue with the ESCT deductions. We gross up the Kiwisaver for each employee to make sure they get the 4% into their Kiwisaver account and then pay the ESCT on top of this. The software is deducting the ESCT and paying the net into Kiwisaver. Please advise how I can gross up the CEC and amend ESCT. Thanks.

4 REPLIES
Ultimate Partner jenniek
2,016 Posts
Ultimate Partner
New Zealand

Re: Gross Kiwisaver and ESCT deductions

Hi there @FF

I've not heard of anyone grossing up the kiwisaver. The ESCT is designed to be deducted from the employer contribution as effectively it's a tax that the Govt keeps. If you wanted to gross up the kiwisaver I could only think that you increase the 4% to a slightly higher amount %, so that it covered the amount of ESCT taken out. That becomes a bit difficult when the amounts are different every week - and also the ESCT is a % tax based on gross earnings of the employee - so it could be different per employee.

Regards,
Jennie Kingma
JK Business Systems Ltd, Hamilton, NZ
Email: jennie@jkbusiness.co.nz
Ultimate Partner Mike_James
3,206 Posts
Ultimate Partner
New Zealand

Re: Gross Kiwisaver and ESCT deductions

Hi @FF, @jenniek, I agree that ESCT is a tax on the employer's contribution, which is why it is deducted in the payroll.

 

There are 4 rates of ESCT at present, depending on the employee remuneration:

$0 to $16,80010.5%
$16,801 to $57,60017.5%
$57,601 to $84,00030%
$84,001 upwards33%

 

So for an employeee earning less than $16,800 (so ESCT = 10.5%), and an employer contribution of 4%, this would be grossed up at 1/(1-0.105), ie 4.4692%. The employee would then receive ~4% into their super, and the tax would equate to ~0.4692%.

Regards Mike (mike@datawise.co.nz)
DataWise Limited (www.datawise.co.nz), developers of:
DataWise Report Writer - Custom Reporting from MYOB programs
(Including AccountRight Classic/Live, and exo Payroll)
FF
2 Posts
Cover User

Re: Gross Kiwisaver and ESCT deductions

Thanks - that was the solution I had come too because when the rate is specified in the contract then the full amount needs to be paid to them. So I increased the rates and the the figures are close enough.

Ultimate Partner jenniek
2,016 Posts
Ultimate Partner
New Zealand

Re: Gross Kiwisaver and ESCT deductions

Hi there @FF

As the ESCT is effectively a tax from the Govt - I would check with an employment authority - eg; EMA if you are a member or the Labour Dept to see whether you are liable to pay the ESCT amount over and above. If you say in a contract that you will pay a salary amount of $50,000 - then you don't add tax on top of this - the same principle would apply for ESCT on kiwisaver.

Regards,
Jennie Kingma
JK Business Systems Ltd, Hamilton, NZ
Email: jennie@jkbusiness.co.nz
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