ESCT

ESCT (Employer Superannuation Contribution Tax) is required to be paid by employers for contributions made to a Kiwisaver, Complying, or Superannuation Fund for the benefit of an employee.

The rate of ESCT to be deducted is based on the annual salary or wages paid to the employee in the previous year. If the employee has not worked a full year, the employer estimates what their earnings would be for a whole year.

The rate of ESCT to be deducted is calculated at the start of each year that contributions will be made and cannot change until the following year when the rate is recalculated.

The following steps are needed to set up ESCT:

  1. Set up the relevant Allowance/Deduction Code for the Kiwisaver, Complying, or Superannuation Funds. This is a code with a Classification of N, Q, or S. Determine which calculation to use. A) Gross employer cash contribution of deducting ESCT from the cash contribution, or B) Net employer cash contribution of deducting ESCT on top of the cash contribution (known as Grossed-up).

  2. If using the Grossed-up method (B), select the tick box ESCT Gross-upon the Allow/Deduct Codes screen.

  3. Set up the special Allowance/Deduction Code that is to be used for the ESCT Deduction. The NZ-IRD field should be set to T - ESCT Percentage Tax.

  4. Attach the ESCT percentage to the employee on the YTD Gross, Tax & Net screen. This value is updated at the start of each tax year by running a process from the Update ESCT Rates screen.

  5. Attach the Kiwisaver, Complying, or Superannuation code to the employee in the Allowance/Deduction window.

  6. Set Program Control option PAY46 Positions 14 to 17 to set the sort options for the PRE471 - ESCT report.

 

When the payroll is run, the taxation will be automatically deducted from the Kiwisaver, Complying, or Superannuation. The deduction code for the taxation will be automatically added to the employee's Allowance/Deduction records.

 

The Calculate Pay process will include a report PRE471 that will detail the Kiwisaver, Complyng and Superannuation payments plus ESCT that were included in the payroll. The details reported will be the Gross amount of the Superannuation, the ESCT taxation deducted and the resulting net amount.

The sort criteria for this report is set in Program Control Option PAY46.

All other payroll reports will show the ESCT amount and the net amount of the contribution.

Details of the Superannuation, the ESCT deducted and the net value are reported on Payslips.

Examples

1. Contribution x ESCT Rate % = ESCT value

$30.00 x 0.175 = $5.25

Contribution $24.75 and ESCT $5.25

2. Grossed-up method

ESCT Rate % / (1 - ESCT Rate %) x Contribution

0.175 / (1 - 0.175) x $30.00 = $6.36

Contribution $30.00 and ESCT $6.36

 

The value of the non-contributory Superannuation, the ESCT Tax and the Net Superannuation must be maintained for the taxation year 1st April to 31 March.

The figures are cleared when the Year End Reorganise process is run.

The values are displayed on the Employee YTD Gross, Tax and Net window.