Spotlight on Employer Superannuation Contribution Tax (ESCT)

Something that’s important when employers think about KiwiSaver is ESCT – the tax on employer superannuation contributions. We take a look at how it works and the tools that can help you calculate ESCT deductions.

ESCT is tax deducted from the employer cash contributions paid into your employee's KiwiSaver or superannuation account. You pay ESCT to Inland Revenue along with PAYE and other employer deductions when you file your Employer Monthly Schedule (IR348) and Employer Deduction (IR345) form.

ESCT is deducted from all employer contributions to employees’ KiwiSaver or superannuation accounts.

An ESCT video on the Inland Revenue website (external link) shows how a small business calculates and accounts for ESCT.

There are three steps for paying ESCT.

1. Work out each employee’s ESCT rate for the year

At the beginning of each tax year, you’ll need to work out the ESCT rates for your staff.

The rate will differ for each person depending on their salary and how long they’ve worked for you.

If an employee has worked for you for the entire previous tax year, you need to base their ESCT rate on the total salary or wage they received, plus the gross employer contribution you made in the previous year.

If an employee did not work for you for all of the previous tax year, their ESCT rate needs to be based on their estimated salary and wages for this income year, plus the gross employer contributions you will make during this year.

You’ll need to work out the rate each year as your employee’s salary may change.

Here are the ESCT rates:

Employee's salary or wage income for year ended 31 March (including gross superannuation employer contributions)ESCT from 1 April
$0 to $16,800 10.5%
$16,801 to $57,600 17.5%
$57,601 to $84,000 30%
$84,001 upwards 33%

2. Calculate ESCT every pay period

Once you know what rate to use for each person, you’ll be able to make the deduction from the employee’s gross employer contribution every pay day and add up the total ESCT for all of your staff, which is recorded on the IR 345. The key information Inland Revenue needs on IR 348 is your net employer superannuation contribution and the total ESCT.

As far as the paperwork goes, each pay period you’ll record the ESCT in three places – your wage book or payroll software, the IR 348 and IR345 forms.

3. Pay ESCT to Inland Revenue with PAYE and other deductions

ESCT needs to be accounted for and paid by the same due date as your PAYE and other deductions. If you’re behind on ESCT or have any questions or concerns, call Inland Revenue.

Tools that can help

The ESCT video on the Inland Revenue website (external link) gives a simple explanation of how to work out and account for the ESCT. Or talk to your tax agent or PAYE intermediary.

Calculating ESCT is easy with these online tools:

PAYE / KiwiSaver deductions calculator (external link)

ir-File (external link)

Tool for Business (including the wage summary template) (external link)

Tax due date calendar (external link)

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