Kiwisaver Questions re Employer contribution and overtime

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Forums › Finance and wealth management › Kiwisaver Questions re Employer contribution and overtime

Aaroona

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#265642 2-Feb-2020 18:55

I wanted to just check with people here before I contact HR/payroll and find out what's happening.

If both me and my employer contribute 3%, would there be any reason for the employer contributions to Kiwisaver to be different from mine?

There were only 2 things I can think of is that my employer isn't fully paid up to Kiwisaver yet, but that would be a huge difference, as the difference between my contributions and theirs is about $4900.

The other is that I do a bit of overtime, but based on the Kiwisaver website, they should still be matching 3% for any earnings, including overtime.

snnet

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#2411661 2-Feb-2020 18:58

The IRD forwards payment of kiwisaver amounts to your scheme provider regardless of whether your employer has paid them. There can be a delay in the funds being transferred to your scheme unless this has changed since weekly payroll filing came into effect. Have you looked at the IRD's KiwiSaver account for your IRD number?

snnet

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#2411663 2-Feb-2020 19:04

Have a good look at your payslip too - mine shows employer contribution and then has ESCT taken off before it's passed on to the scheme provider.

afe66

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#2411665 2-Feb-2020 19:08

The thing that annoys me is I'm on a salary yet the funds transferred to my kiwisaver provider vary month to month.

Jase2985

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#2411694 2-Feb-2020 19:56

the difference isnt tax on the employer contribution is it?

BlinkyBill

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#2411705 2-Feb-2020 20:24

Inland Revenue has a comprehensive website explaining how employer (and employee) contributions are received, processed, and passed on to your scheme. It clearly explains the delays that might be observed.

Aaroona

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#2411706 2-Feb-2020 20:25

snnet:

Have a good look at your payslip too - mine shows employer contribution and then has ESCT taken off before it's passed on to the scheme provider.

Thanks, it could be that maybe. I'm not sure if mine has all of that information. I know how Payroll system is a little weird.

In fact, I'll log in now and check.

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Aaroona

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#2411714 2-Feb-2020 20:51

Looking at my payslip at the moment. it shows the values match, but doesn't say anything about any Tax being deducted there.

Looks like I may need to have a chat with payroll to clarify how that gets shown. All I see if the Gross value of each line item, and then the Net value I receive. The Kiwisaver portions are separated out, but no tax information for those contributions.

k1w1k1d

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#2411715 2-Feb-2020 20:58

I gave up trying to match payments on IRD website to payslips. They never made sense.

Check your payslips.

Your contribution will be 3% of your gross pay. This all goes to your Kiwisaver account.

Employer contribution will also be 3% of gross pay, but Employer Superannuation Contribution Tax (ESCT) is taken off the employer contribution before it is passed to your Kiwisaver account.

Depending on your income ESCT will probably be 30% or 33%.

Aaroona

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#2411719 2-Feb-2020 21:07

k1w1k1d:

I gave up trying to match payments on IRD website to payslips. They never made sense.

Check your payslips.

Your contribution will be 3% of your gross pay. This all goes to your Kiwisaver account.

Employer contribution will also be 3% of gross pay, but Employer Superannuation Contribution Tax (ESCT) is taken off the employer contribution before it is passed to your Kiwisaver account.

Depending on your income ESCT will probably be 30% or 33%.

Thanks, yeah I'm guessing this is what it'll be.

You're dead right about the payment information though. Why on earth did they set it up this way. They clearly know it's a bit complicated, their website literally says "Don't worry, it'll all be okay" haha.

Jase2985

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#2411720 2-Feb-2020 21:07

my payslip shows mine and my employer contributions being the same

my kiwisaver account shows my contribution and my employers contributions differing by about 33%, which is the tax rate.

Technofreak

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#2411738 2-Feb-2020 22:54

You'd think as an incentive for employees to provide for their retirement the government would make Kiwi Saver contributions tax free. I think that's the case in some countries.

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PolicyGuy

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#2411769 3-Feb-2020 08:06

Technofreak:

You'd think as an incentive for employees to provide for their retirement the government would make Kiwi Saver contributions tax free. I think that's the case in some countries.

If you make superannuation contributions tax free (or reduced tax rate as in Australia), the well-off but scruple-free immediately rip off the system.

We saw this in NZ when the variable-rate ESCT was first introduced, based on the employee's marginal tax rate.
The marker case was the guy who was paid over $100k, and arranged for all except $5 per fortnight (yes, five dollars, actually for his Social Club dues) to be paid as Employer Superannuation Contribution into a registered Super Fund (not KS). Since his 'taxable income' was $5/fortnight, the ESCT was at the lowest rate (10.5%) and the guy was entitled to a Community Services card. Every month, he drew out most of his 'superannuation contributions' and paid the 5% early withdrawal tax, giving him an effective tax rate of 15.5%.
As a result, the then government changed the rules to make the ESCT rate determined by the sum of the employee's salary and their employer superannuation contributions, which closed that loophole.

The NZ Superannuation system is a "TTE" system: you pay Tax on contributions, Tax on fund earnings, but withdrawals are tax Exempt.
There are other ways to design superannuation schemes, but it would be very difficult for NZ to change now.