Gross Kiwisaver and ESCT deductions

This thread is now archived and closed to new comments.
Some of the links provided in this thread may no longer be available or relevant.
If you have a question please post a new topic.
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
2,072 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
3,323 Posts
Ultimate Partner

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
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
2,072 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
Didn't find your answer here?
Try using advanced search to find a post more easily Advanced Search
or
Get the conversation started and make a new post Start a Post