Changes to ESCT from April 2012
ESCT (employer superannuation contribution tax) is tax deducted from employers' cash contributions to KiwiSaver schemes, complying funds and other superannuation funds.
The 2% exemption from employer superannuation contribution tax (ESCT) is about to be removed. From 1 April 2012, if you’re contributing to a KiwiSaver scheme or a complying fund, all your employer contributions will be liable for ESCT.
The rate for calculating ESCT, will change from 1 April 2012. Unless you’re paying contributions into a defined benefit fund, you won’t be able to use the 33% flat rate option. Instead, you’ll need to calculate ESCT at the employee’s marginal ESCT rate. The other option is to treat your employer contributions as salary or wages and tax your employee through PAYE (with their agreement).
Click here for more info: http://www.ird.govt.nz/changes/employers/budget-employers.html?id=more
New ACC rates agreed by Cabinet
On 12 October 2011 the Minister for ACC announced the ACC levy rates for 2012-13. These rates were considered and agreed by Cabinet to be passed into legislation during the first quarter of 2012.
o The earners’ levy is set at $1.70 (GST inclusive), down from $2.04 the previous year.
o The minimum liable earnings for self-employed workers increases from $26,520 to $27,040.
o The maximum liable earnings will increase for
* self-employed people under the Work and Earners’ Account from $110,018 to
* employees, private domestic workers and earners other than self-employed under the Work and Earners’ Account from $111,669 to $113,768
* employees and private domestic workers for calculating the residual portion of the Work Account from $110,018 to $111,669
Changes to Student Loan tax codes and exemption certificates
If you make student loan deductions, changes are underway starting on 1 April 2012. Employees who have a student loan must add “SL” to their tax code, unless they have an exemption or use a CAE, EDW or WT tax code. You have to make student loan deductions from their pay when they earn over the pay period repayment threshold, eg. $367 weekly. From 1 April 2012, there are some changes to the way you make your employee’s student loan deductions.
Pay period repayment obligations
The standard student loan deductions you make from your employee’s salary or wages cover their repayment obligation, unless there’s a significant over or under deduction. Make sure your deductions are correct and properly identified on your employer monthly schedule (EMS).
If the correct student loan deductions aren’t made from your employee’s salary or wages, they may be paying significantly under what they’re required to pay. The IRD may contact you (and your employee) and ask you to make additional deductions on top of the standard deductions. You’ll need to identify these extra deductions separately by entering the new “SLCIR” repayment code on your EMS.
Your employee may not have to make student loan repayments if they’re studying full-time and expect to earn less than $19,084 (the annual repayment threshold) in the tax year. Your employee will give you a certificate authorizing their repayment deduction exemption. They won’t have to use an “SI” repayment code while they have this. When the exemption ends you must add back the “SL” repayment code. This means you’ll make the deductions at the correct rate without significant under- or over-deductions.
Special deduction rates
There are new rules for getting a special rate for student loan deductions. If your employee gives you a special deduction rate certificate, you’ll need to make student loan deductions of the rate specified and for the period stated.
Many borrowers make payments on top of their compulsory deductions to pay their loan off faster. These additional repayments may also be eligible for a voluntary repayment bonus. If you’re already making extra student loan deductions for your employee or they ask you to start, identify this on your EMS using the new “SLBOR” repayment code. The IRD will recognize these as voluntary extra deductions when they process your EMS and include them in your employee’s voluntary repayment bonus calculation.
For more information about the student loan changes go to www.ird.govt.nz/studentloans
Update payroll software
If you use a payroll software package for working out your PAYE, you’ll need to get an upgrade from your software provider. For more info, the IRD has a checklist. Click here: http://www.ird.govt.nz/changes/employers/budget-employers.html?id=more
Using the correct tax code
For new employees
When you welcome new employees on board make sure they’re on the right tax code so that the right tax rate is deducted. This is particularly important if they have a student loan.
You can make things easier for you, your staff and the IRD by reminding your employees to use the right tax code. This will ensure you deduct the right amount of tax from their wages, as well as other deductions like student loan repayments.
If the IRD see’s that your employee has the wrong tax code, they will write to you requesting that you change it. They will advise which employees are using incorrect tax codes and let you know which tax code to use.
You can go to www.ird.govt.nz “Work it out” to use the PAYE / KiwiSaver calculator and calculate tax deductions from your employees’ gross wages including student loan deductions.
For existing employees
It is also a good idea to have existing employees complete a new IR 330 to make sure they are using the correct tax code. Circumstances do change for example employees who have more than one job, a student loan or are eligible for the Independent Earner Tax Credit.
From 1 April 2012 the IR 330 will include the new tax codes, and should be completed when changing tax codes.
If you require any assistance or advice in relation to any of these changes, contact your Gilligan Sheppard advisor.