Do you owe IRD KiwiSaver tax?

Employer contributions to KiwiSaver were changed on 1st April 2012.

Before this date, these contributions were tax free.  From 1st April 2012 - taxation has been payable on the contributions.

As an employer, it can be difficult to keep up to date with all the changes to the taxation regime, particularly if you don't have an external payroll provider.  As a small business ourselves, we strongly recommend that you engage an external payroll system, this makes the payment of tax and keeping up with tax one less thing to think about.  For more information on using an external payroll system, check out our blog article.

Unfortunately, it appears that some employers have not caught up with the fact that they need to take tax out of the KiwiSaver employer contributions.  This is unfortunate on several levels:

1. This means that your employees have been getting more contributions into their KiwiSaver than they are entitled to and

2. The IRD will be chasing employers for unpaid Employer Superannuation Contribution Tax.

So, what can you do it you think you might have missed this new tax?

1. Get yourself an external payroll provider, so that you don't miss this again.

2. Contact your accountant and alert them to this possible oversight. If you don't have an accountant, we suggest that you contact IRD and setup an arrangement with them to pay the taxation.

3. Work out what you are going to do about the overpayment of KiwiSaver contributions to your employees.  For many businesses who value their staff, it may be best to leave those funds with your employees and pay the tax on top.  You will then need to decide whether to tell your employees about the error.

For more information on Employer Superannuation Contributions Tax - (ESCT) - check out this blog post

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