Advice and instructions, revised 3 June 2009. To print/download this document, use the PDF version, attached above.

(Note that this advice supersedes that of 9 July 2008.

Introduction and background

1 In December 2007 legislative amendments to the KiwiSaver rules introduced the requirement for all New Zealand employers to pay employer contributions to Inland Revenue for eligible employees who choose to make employee contributions to a KiwiSaver scheme.

2 Compulsory employer contributions (CEC) to KiwiSaver started from the first full pay after 1 April 2008, at the legislated rate of 1% of gross salary. KiwiSaver employee deductions and employer contributions must be forwarded to Inland Revenue through the PAYE system, accompanied by the IR345 form. Documentation in the form of the EMS (IR348) or the ir-File must contain detailed data showing employee deductions and related employer contributions.

3 Most State sector organisations may qualify for and claim reimbursement from the State Services Commission (SSC) for the actual net cost of CEC; this is subject to eligibility and "no double dipping" rules. Claims are made via a quarterly invoice.

4 See Appendix 3 for a list of State sector employers that may be eligible for reimbursement of CEC. State-owned enterprises and their subsidiaries, subsidiaries of Crown entities, and entities funded but not owned by the Crown such as NGOs, are not eligible for the central funding. Further information about eligibility and "no double dipping" rules is included in the section Reimbursement of CEC.

Employee's eligibility to receive a compulsory employer contribution (CEC)

5 Under the KiwiSaver rules, most employees who have a KiwiSaver account will be entitled to receive CEC if they are making employee contributions to their KiwiSaver scheme from salary or wages. The following paragraphs list those employees who are not eligible to receive CEC:

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  - on a contributions holiday; or

  - also a member of a defined benefit scheme (such as the Government Superannuation Fund (GSF) or the National Provident Fund's DBP Contributors Scheme); or

  - under 18 years of age; or

  - at or over the age of eligibility for New Zealand Superannuation (currently 65), or [have been] a member of a KiwiSaver scheme or complying fund for five years, whichever date is later (a member joining at age 64 is entitled to compulsory employer contributions until age 69).

  - The other scheme was registered before 17 May 2007

  - The employee was offered membership of the other scheme before 1 April 2008 (or is employed after 1 April 2008 under a collective agreement in force before 17 May 2007 that requires employer contributions to the other scheme)

  - The employer contributions to the other scheme are vested in the member within five years of joining the scheme.

5.1 Those employees not eligible for CEC are KiwiSaver members who are:

5.2 In addition, employees who are contributing members of other registered superannuation schemes including complying superannuation funds, to the extent that they are receiving employer contributions to that other scheme, will not be eligible to receive CEC if:

5.3 Finally, if the employee's employment is as a Member of Parliament, a judicial officer, or a sworn member of the police they will not be eligible for CEC to the extent they are receiving employer contributions to other superannuation schemes.

6 Any employee who is a KiwiSaver member may receive voluntary employer contributions, even if they are not eligible for CEC as described in paragraphs 5.1 - 5.3.

7 The CEC for KiwiSaver is to be paid on top of gross salary and wages. However, from 13 December 2007, employees and employers can agree on different terms as to how the CEC are positioned in employment packages. Central funding is available only for CEC that are paid on top of existing remuneration (not tradable for cash).

Taxable nature of employer contributions and CEC to KiwiSaver schemes

8 A portion of employer contributions to KiwiSaver schemes is exempt from employer superannuation contribution tax (ESCT).¹ The exemption applies to the lesser of:

• an amount equal to the employee's contribution, or
• 2% of the employee's gross salary or wages.

9 Any employer contributions over the exemption threshold are subject to ESCT.

Employer tax credits

10 Prior to 1 April a significant proportion of the cost of CEC was met for many employers by Employer Tax Credits (ETC).

11 All contributing employers, including State sector agencies, were entitled to claim the ETC, and all CEC reimbursement claims were for the marginal extra costs above ETC.

Maximum funded CEC rate

12 The maximum CEC rate that will be funded by Vote State Services for costs incurred in each twelve months is the legislated percentage of gross salary and wages (as defined in the Income Tax Act 2007). This means:

13 See next section: Reimbursement of CEC for the amounts that will be reimbursed taking into account existing and new scheme offers to staff.

Reimbursement of CEC

14 Agencies will be reimbursed from Vote State Services for the increase in their actual costs to meet the CEC obligation in relation to KiwiSaver. The reimbursement does not cover fees or other indirect costs such as payroll amendments or staff training, and it does not cover the amount of any pre-existing employer contribution offers to registered superannuation schemes or KiwiSaver schemes or where the KiwiSaver offer is replacing a prior scheme offer (except in relation to centrally funded SSRSS employer contributions, see paragraph 19).

15 "Actual cost" refers to the qualifying contributions paid to the IRD; therefore claims should not have accruals included.

16 Agencies that pay an employer contribution to another scheme, that existed before 1 April 2008, and fund this cost out of baseline are not entitled to central funding of those contributions or of any KiwiSaver contributions that replace that offer. For example, funding is not available if the employee with an existing superannuation subsidy:

• transfers from the old scheme to KiwiSaver, or
• adds KiwiSaver to their super portfolio, or
• leaves the Agency and is replaced by another person, or
• the employee's position is disestablished and/or they cease contributing to an existing scheme, and the budget is moved to cover another position.

17 It is important for the agency to know what its base starting position is, as to (1 April 2008) eligibility for KiwiSaver funding. Only roles that were not eligible for a subsidised scheme will be eligible for KiwiSaver CEC reimbursement. The documented starting position can be used to help prove validity of the agency's submitted claim.

18 An employer that is currently reimbursed from Vote State Services for employer contributions to SSRSS can claim reimbursement for the Maximum Funded CEC Rate for all employees who have no other subsidised scheme. For example, if a funded SSRSS member elects to receive CEC to KiwiSaver, under the SSRSS rules they can not also receive funded SSRSS employer contributions (or salary sacrifice contributions to SSRSS). Therefore the employer would be able to seek central funding for the Maximum Funded CEC Rate for that employee, as no other crown funding is being spent on that employee for superannuation.

19 Reimbursement is only available to the extent that CEC are paid on top of remuneration and not tradable for cash.

20 SSC will not reimburse voluntary employer contributions where no CEC is payable for an employee or group of employees.

21 In circumstances where a new employee opts out of KiwiSaver (on or after day 14 and on or before day 56 of starting employment, or as advised by IRD), the employer will receive a refund of CEC plus interest. The amount received from Inland Revenue should be offset against the funding claimed for that quarter. Show this offset through the adjustment section of the claim supporting data form.

Making a reimbursement claim to the State Services Commission

22 At the end of each quarter, agencies that are eligible and wish to make a claim, can invoice the SSC for their CEC (up to the Maximum Funded CEC Rate) for pay runs that occurred in that quarter, up to and including the last whole pay period in the quarter.

23 Each invoice must include details of the bank account to which payments are to be made, employer's PAYE IRD number(s), and an email address for queries and advising remittances.

24 Quarterly invoices should include details as per the attached supporting data worksheet (Appendix 1), certified by the CFO or his/her designate, to reach the Commission no later than the 7th working day after the end of each quarter.

25 Each June quarter invoice should note any accrual amount relating to unclaimed KiwiSaver CEC amounts for the year just ended to ensure funding is available for when the actual cost is invoiced.

26 Invoices should be addressed to:

State Services Commission
KiwiSaver in the State Sector
Attention Finance
PO Box 329
Wellington

Supporting data for reimbursement claims

27 The supporting data worksheet (Appendix 1) sets out the information required to support a reimbursement claim. SSC also uses this information to monitor trends in funded KiwiSaver membership.

28 The supporting data worksheet should only show information relating to staff that are eligible to be funded under the funding rules; please do not include any information relating to schemes not eligible for reimbursement as described in the section on Reimbursement of CEC above.

29 Adjustments must be made for any items that may otherwise distort the amount able to be claimed. This may include refunds of contributions when an employee opts out, or where a correction needs to be made for a mistake made in a previous return. Details of how the adjustments are calculated should be noted in the worksheet.

GST

30 In terms of the GST legislation, these invoices for recovering expenditure are deemed to be for supply of services and should therefore have GST added.

Payment by SSC

31 SSC expects to pay the quarterly invoices received from agencies according to SSC's normal payment cycle (currently twice monthly) subject to resolution of all outstanding enquiries in relation to that invoice. We will pay invoices by electronic transfer, and send a remittance advice by email.

Audit

32 Agencies can expect their records pertaining to claims on the KiwiSaver central funding to be examined during the course of their annual audits. The SSC may request additional information and explanations relating to claims, or request or undertake an audit of the claims and the associated records.

Forecasts

33 As part of the process of obtaining funds, each agency will need to complete forecast data worksheets (in Appendix 2). This information will help SSC with its forecasting and funding administration. SSC expects to request this information to support Crown budgeting processes, and will give adequate advance notice of this requirement.

34 Currently these forecasts are expected to be completed in September and February, for the current year funding adjustments, for the next financial year budget and outyear forecasts. This will assist in ensuring adequate appropriations will be allocated to Vote State Services.

Enquiries

35 Enquiries about invoicing and reimbursements should be made to:

super@ssc.govt.nz

Appendix 1: KiwiSaver claim - supporting data worksheet

This worksheet is provided here as a PDF file (11.2k)

Note: contributions in this return should be the amount that represents the current minimum legislated amount of CEC, not the full amount payable.

Note: from the June 2009 quarter, any Employer Tax Credits listed are expected to relate to adjustments or refunds for transactions that occurred prior to 1 April 2009.

Appendix 2: KiwiSaver claim - forecast data worksheet

This worksheet is provided here as a PDF file (11.6k)

Appendix 3: State Sector Agencies

¹ From 1 April 2008, specified superannuation contribution withholding tax (SSCWT) is called employer superannuation contribution tax (ESCT), as a result of changes introduced in the Income Tax Act 2007.