Issued by the State Services Commission 20 May 2011, based on legislation current as at 19 May 2011.
Q: What are the changes to KiwiSaver in Budget 2011 that affect me as an employer?
A: There are three areas of change to KiwiSaver that affect State sector employers:
Employer Superannuation Contribution Tax (ESCT): From 1 April 2012, the Government proposes that compulsory employer contributions to employees’ KiwiSaver accounts will be subject to ESCT. In addition, you would need to calculate ESCT at a rate equivalent to the employee’s marginal tax rate, as the option to apply ESCT at a standard rate would cease from 1 April 2012.
Compulsory employer contributions: The Government proposes to increase the compulsory employer contributions to KiwiSaver accounts to 3% on 1 April 2013. This would require employers to increase their contributions (except where already contributing at or above 3%).
Employee contributions: The Government proposes to increase the minimum employee contribution rate from 2% to 3% for all members from 1 April 2013. This change would require employers to raise the level of payroll deduction for employees who are currently contributing at the 2% rate.
These changes would require changes to your payroll system.
Q: Can my employees join KiwiSaver even if they are already involved in another workplace savings scheme?
A: All employees can join KiwiSaver if they meet the eligibility criteria, regardless of what other scheme(s) they have joined. If they are receiving an employer subsidy into that scheme that subsidy may count towards the compulsory employer contributions. For more details, see http://www.ird.govt.nz/kiwisaver/employers/how/working-with-providers/existing-schemes/ .
Note: Check with your scheme manager or trustee if you are unsure of the way the KiwiSaver rules fit with or take precedence over other scheme rules.
Q: Is there any funding available for State sector agencies to pay for the compulsory employer contributions to KiwiSaver?
A: Most State sector agencies are eligible for, and are claiming, reimbursement of compulsory employer contributions to KiwiSaver accounts from a central fund administered by the State Services Commission.
In Budget 2011 the Government announced that this central fund will be terminated from 1 July 2012. By early 2012, the State Services Commission will issue instructions to employers that currently make claims on the central fund about the final reimbursement process for the June 2012 quarter.
Please note that central funding stopped as at July 2012 and is no longer available to employers (August 2013).
Q: As an employer where can I obtain more information about the changes to KiwiSaver?
A: Further information about these changes is available online at http://taxpolicy.ird.govt.nz