Employer superannuation contribution tax (ESCT)

Employer superannuation contribution tax (ESCT)


Employer Superannuation Contribution
Tax (ESCT) Are you an employer? If you make contributions to an employee’s
KiwiSaver account, you’ll need to pay employer
superannuation contribution tax (ESCT). ESCT is a tax deducted from the
employer contributions you pay into the employee’s
KiwiSaver account. Employer contributions are compulsory,
and the minimum amount you need to pay is 3% of the
employee’s gross salary or wage. You pay ESCT to Inland Revenue
along with your PAYE and other employer deductions. ESCT is also paid on employer
contributions to superannuation schemes other
than KiwiSaver. Inland Revenue’s website has more
information about these other schemes. Jennie owns a busy hairdressing
salon in town. All four of her employees belong to
KiwiSaver. At the beginning of the tax year,
Jennie works out the ESCT rate for each of her employees. She starts
with senior stylist Daniel. Last year, Daniel worked at the
salon for the full 12 months. That means Jennie can use his last year’s
salary to work at his ESCT rate for the coming
year. Here’s the table of ESCT rates. Daniel’s salary for last year was $65,000. Jennie’s 3% KiwiSaver employer contribution of $1,950 added to his salary gives a combined figure of $66,950, making Daniel’s ESCT rate 30% of
the employer contribution. Jennie will use this rate for Daniel for
the whole of the coming year. If your employee wasn’t with you for all
12 months of the previous year, you work out the ESCT rate based on
what you estimate or expect their salary and your contributions will be for the coming year. Please visit our website for more
information. Jennie has both full-time and part-time
employees who earn different salaries. This means they each get their
own ESCT rate. Let’s see how Jennie calculates Daniel’s
ESCT every payday. Daniel’s salary for the week is $1,250. That means Jennie’s employer
contribution is $37.50. ESCT is a tax on the employer contribution. For the purpose of calculating
ESCT, you use whole dollars only. Jennie removes the cents and applies
Daniel’s ESCT rate of 30%. She must pay ESCT of $11.10. Jennie needs to calculate one more figure:
the net employer contribution. That’s easy. All she does is deduct the ESCT from the
employer contribution including the cents. Jennie must include both of these figures
in her employer returns. You don’t have to work out
your ESCT manually. Why not do it the easy way?
Here are two tools that can help. Alternatively, a PAYE intermediary
could also help you. To check these out, click on the links
under the video. You’ve just seen how most employers
calculate their ESCT. There’s another method you can use, which taxes the employer contributions
under the PAYE rules. Please visit our website for more
information. Meanwhile, back at the salon, Jennie has
worked out ESCT for all her employees. Jennie takes the figures for each of
her employees weekly pays and totals these up for the month. Remember the two figures she needs for
her employer returns? The net employer contribution and ESCT.
She adds everything up. ESCT is paid to Inland Revenue
along with your employer deductions. First, Jennie completes her Employer
Monthly Schedule. She enters her total net employer
contributions in Box 7. Next, Jennie completes her
Employer Deductions Form. She enters her total net employer
contributions in Box 7, and her total ESCT in Box 8. Finally, Jennie checks that Boxes 3 through to 7 contain the same figures on both forms. She knows however, Box 8 only appears on the
IR 345 Employer Deductions Form. And that’s all there is to it! Please remember you must file both returns, and pay your ESCT and other employer
deductions by the due date. Inland Revenue’s ir-File service
makes the job a whole lot easier. Check out the link under the video. Are you behind with your ESCT? Made a mistake? Phone us on 0800 377 772. Our friendly team can help you get
back on track. If you need more information, go to the
Business and Employers section on our website, where you will find the
PAYE calculator. The Tool for Business also has a handy
eletronic wage-book you can download, and a lot of information about all
aspects of payroll. Your tax agent or PAYE intermediary
can also advise you about ESCT, and help you choose the calculation method
that’s right for your business.

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