ESCT is the employer superannuation contribution tax deducted from the employer’s contribution to KiwiSaver and workplace savings scheme under the Financial Markets Conducts Act 2013, made for an employee.
The ESCT rate is set when an employee first starts employment with the employer and reset each 1 April after that or when the tax laws change.
ESCT is paid to the Inland Revenue along with the PAYE deductions and net KiwiSaver contributions on the employer deductions form (IR345).
ESCT rates
The ESCT rate that applies depends on the employee’s “relevant remuneration”. Relevant remuneration equals the taxable income of the employee plus the employer contributions to KiwiSaver and other superannuation schemes. Only income and the contributions paid by the employer and related employers are included. That paid by unrelated employers and income earned elsewhere does not count.
To calculate an employee’s ESCT rate
An employee’s ESCT rate is set when the employee first starts employment with the employer and is updated each subsequent 1 April unless the legislation changes. The ESCT rate applies for the year and ignores pay reviews during the year.
When the employee first starts work
The ESCT rate is calculated by making a “reasonable estimate” of what the employee’s relevant remuneration will be from the day they started to the next 31 March. For example, if he started on 1 February:
| $ | |
| Annual income level | 40,000 |
| Employer contributions to KiwiSaver (3%) | 1,200 |
| Total annual “relevant remuneration” | 41,200 |
|
Expected remuneration (February to March) = 2/12ths x $41,200 |
6,866 |
| ESCT rate (as per table) | 10.5% |
Note: “KiwiSaver” above should be KiwiSaver and any other employer superannuation scheme payments.
At 1 April
- If the employee has not worked for the employer for the full tax year
The ESCT rate is calculated by making a ‘reasonable estimate’ of what the employee’s relevant remuneration will be for the coming year.
| $ | |
| Annual income level | 40,000 |
| Employer contributions to KiwiSaver (3%) | 1,200 |
| Total annual “relevant remuneration” | 41,200 |
| ESCT rate (as per rates below) | 17.5% |
- If the employee has worked for a full tax year
The ESCT rate is calculated based on the actual relevant remuneration for the previous year to 31 March.
| $ | |
| Actual total income paid | 58,000 |
| Actual employer contributions to KiwiSaver (3%) | 1,740 |
| Total annual “relevant remuneration” | 59,740 |
| ESCT rate (as per rates below) | 30% |
Current tax rates (since 1 October 2010)
| Relevant remuneration level | ESCT rate |
| $0 to $16,800 | 10.5% |
| $16,801 to $57,600 | 17.5% |
| $57,601 to $84,000 | 30% |
| $84,001-plus | 33% |
