KIWISAVER MAKES CHANGES
2447POSTED:
From the first pay period on or after 1 April 2013, the contribution rates for both employees and employers increased from 2% to 3% of gross salary. However, employees will still be able to select a higher employee contribution rate of 4% or 8%.
All employer cash contributions to a superannuation fund (including KiwiSaver schemes and complying funds) are liable for ESCT (Employer Superannuation Contribution Tax). The exception is if the employee and employer have agreed to treat all of the employer contribution as salary or wages under the PAYE rules.
For employers, there are two approaches to calculating minimum contributions to KiwiSaver:
1. The "Default Approach"
2. The "Total Remuneration Approach"
The "Default Approach" arises when an employee is a member of KiwiSaver and receives a 3% employer contribution in addition to normal remuneration.
The "Total Remuneration Approach" is where an employer sets a fixed amount to be paid to the employee as remuneration and then takes the cost of paying any employer KiwiSaver contributions out of the employee’s pay. This gives certainty around wage costs and also removes any perceived bias between KiwiSaver versus non-KiwiSaver employees.
However, it should be noted that if an employer wishes to adopt a total remuneration approach to KiwiSaver, the employer must provide for this in the employment agreement, and it must be agreed to and signed off by both employer and the employee. If an employer does not include a total remuneration clause in an employment agreement, the default approach will apply.
Comments
Testimonials
This letter is to express my appreciation for the assistance and encouragement of both Anthony Lipscombe and particularly John Heaslip over the last financial year. The period since activating my trading trust has been one of considerable stress, as well as personal development, as I embarked on this as a relative business neophyte with virtually no awareness of the contemporary requirements of running a business, particularly the financial records aspect. During much of this period I have therefore felt considerable out of my depth. However I have been lucky enough to have had the benefit of the advice and support of John Heaslip in rationalizing what was a fairly chaotic set of records of the first year property trading. I am able to say that John in particular, has been unstinting in his attention to my needs and has done so in a manner which has never alluded to my extremely rudimentary grasp of managing a business, or even of being unable to set out a spread sheet properly. The result of the above guidance is that now, although my trading trust would still not be able to operate without the advice of GRA, I do least feel a sense of satisfaction that I have got to my present point without major disaster and that my property trust does now have some kind of firmer basis for any future activities - Name withheld by request
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
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