{"id":150683,"date":"2025-11-24T05:26:08","date_gmt":"2025-11-24T05:26:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/150683\/"},"modified":"2025-11-24T05:26:08","modified_gmt":"2025-11-24T05:26:08","slug":"election-2026-nationals-kiwisaver-contribution-proposal-would-lead-government-to-get-more-money-from-employer-superannuation-contribution-tax","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/150683\/","title":{"rendered":"Election 2026: National\u2019s KiwiSaver contribution proposal would lead Government to get more money from Employer Superannuation Contribution Tax"},"content":{"rendered":"

National is suggesting<\/a> increasing employer contributions by 0.5% per year over four years, taking it from 4% in 2028 to 6% in 2032. <\/p>\n

How does the Government pay for it? <\/p>\n

National proposes most Government agencies will have to meet the additional costs from within their own baselines. This means from within the money they are already allocated. <\/p>\n

The party says, \u201csome funding for cost pressures could become available for certain agencies\u201d, so the then-Government could chip in more cash if necessary. That would be met from future Budget allowances. <\/p>\n

But the last paragraph of the factsheet also acknowledges that any cost pressures will be \u201coffset by an increase in Employer Superannuation Contribution Tax (ESCT) resulting from increased employer contributions\u201d. <\/p>\n

\u201cAn increase in Employer Superannuation Contribution Tax\u201d?<\/p>\n

\"TheThe KiwiSaver policy was National’s first for the 2026 election. Photo \/ Mark Mitchell<\/p>\n

What does that mean? <\/p>\n

The Employer Superannuation Contribution Tax or ESCT is a tax deducted from the contribution that employers make to an employee\u2019s KiwiSaver or alternative fund<\/a>. <\/p>\n

In most cases, employers must contribute at least 3% of a worker\u2019s gross earnings on top of their regular pay. Total remuneration packages blur the line on this as the employer contribution<\/a> can be paid as part of that package, rather than on top of. <\/p>\n

The ESCT explained<\/p>\n

Before the employer\u2019s contribution goes into the employee\u2019s KiwiSaver fund, tax is shaved off for the Government. <\/p>\n

This is the ESCT. It isn\u2019t an additional amount of money employers have to pay on top of the contribution but comes from the contribution they are making, so from the money going to the employee\u2019s KiwiSaver. <\/p>\n

According to Inland Revenue (IR), the rate that this contribution is taxed will depend on whether the employee began before the start of the previous tax year, and the combined total of their salary\/wages and the employer\u2019s contributions. <\/p>\n

So, say someone has been working at a business since before the start of the previous tax year and their salary plus their employer contributions is worth $65,000. Their ESCT rate would be 30%. <\/p>\n

If they\u2019re paid fortnightly, a 3% employer contribution would be $75. But this is before the ESCT is removed. With a 30% ESCT rate, the employee would instead receive $52.50 from their employer, and the rest would head to the Crown. <\/p>\n

Under National\u2019s policy<\/a>, if the employer contribution was the default 6%, the ESCT would therefore double. This is the \u201cincrease in Employer Superannuation Contribution Tax\u201d National is talking about. <\/p>\n

Another example is someone whose remuneration is $96,000 when their salary plus employer contributions is added together. Their ESCT rate is 33%. <\/p>\n

Fortnightly, their employer\u2019s 3% contribution would be about $110.76, of which $36.30 is then sent away in ESCT, leaving the employee about $74.46. <\/p>\n

Should this double to 6%, the employer\u2019s contribution would be $221.52, with about $72.93 in ESCT and $148.59 going to the KiwiSaver fund. <\/p>\n

\"KiwiSaverKiwiSaver is used primarily for savings for a first home or for retirement. Photo \/ Getty Images<\/p>\n

A National Party spokesperson told the Herald increasing KiwiSaver contributions \u201cwill increase costs for the Crown but will also increase the tax the Crown receives on employer contributions to workers\u2019 KiwiSaver accounts\u201d.<\/p>\n

They said the policy \u201cis not a tax hike. Tax rates are not being increased\u201d.<\/p>\n

National didn\u2019t provide information on how much additional tax revenue it expected, saying the long-term impact on the Government\u2019s books would partially depend on how employers and employees responded.<\/p>\n

While National plans to increase the default rates to 6%, workers could still choose to only contribute 3%, or opt out of participating altogether.<\/p>\n

If re-elected, National would commission work on the impacts of the proposed increases once they become Government policy. <\/p>\n

\u201cOfficials do not model political parties\u2019 policies, but the policy draws on the work done to support the Government\u2019s decision to increase employee and employer contribution rates from 3 to 4% over three years.\u201d<\/p>\n

The fiscal impact of increasing default KiwiSaver contributions was something modelled<\/a> very recently by IR before the Government announced in the Budget it would increase them from 3% to 4% by 2028. <\/p>\n

Officials said higher employer contributions would increase the ESCT collected by employers and paid to the Crown. <\/p>\n

\u201cHowever, this increase will be partially offset by lower income tax paid by employers because they will be entitled to larger income tax deductions arising from higher wage costs. <\/p>\n

\u201cThe higher tax revenue from increasing the employer contribution rate does not include the impact of total remuneration contracts, or employers passing on the cost of the higher contribution rate to employees through slower wage growth over time. This means the fiscal benefit may be overstated.\u201d <\/p>\n

The net fiscal impact of this was found to be about an additional $540m for the Crown over the forecast four-year period. That was made up of an extra $1.233 billion from higher ESCT revenue offset by a reduction in income tax revenue of $693m. <\/p>\n

\"NationalNational says more tax money will be received as a result, but it’s not a tax hike. Photo \/ Michael Craig<\/p>\n

Robyn Walker, a tax partner at Deloitte, said ESCT itself isn\u2019t an additional cost to businesses as it\u2019s coming from the contribution employers are having to make to their employees\u2019 KiwiSaver. As a result, it is the employee that bears the brunt of the cost, she said.<\/p>\n

She said the tax is withheld from the contribution and \u201cyou end up in the equivalent position as if you\u2019d been paid money, you took your after-tax money, and you invested it somewhere else\u201d. <\/p>\n

Walker explained that before KiwiSaver was introduced, more employers would have their own superannuation schemes and the tax would have applied to any contributions to those. <\/p>\n

But when KiwiSaver began in 2007, an opt-in incentive was a tax exemption on contributions up to 2%, Walker said. <\/p>\n

\u201cWe actually saw a lot more money going into accounts in those early years. Because ESCT didn\u2019t apply originally, when the exemption was removed in Budget 2011 with effect from 2012, that\u2019s when a lot more employers needed to learn about ESCT potentially for the first time.\u201d <\/p>\n

She\u2019s referencing the decision by the previous National Government at Budget 2011 to remove the exemption so ESCT applied to all employer contributions.<\/p>\n

An IR document from Budget 2011 says that because ESCT is usually deducted from the employer\u2019s contribution, it is \u201cnot an additional cost for employers\u201d.<\/p>\n

Jamie Ensor is a senior political reporter in the NZ Herald press gallery team based at Parliament. He was previously a TV reporter and digital producer in the Newshub press gallery office. He was a finalist this year for Political Journalist of the Year at the Voyager Media Awards.<\/p>\n","protected":false},"excerpt":{"rendered":"National is suggesting increasing employer contributions by 0.5% per year over four years, taking it from 4% in…\n","protected":false},"author":2,"featured_media":150684,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[2246,24744,138,8611,15158,5903,12765,246,71,1333,266,5345,6964,7240,300,130,3556,71084,111,139,69,4762,244,245,17159,29056,7676,7493,312,314,7496,61,4060,1533,6730],"class_list":["post-150683","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-2246","tag-amount","tag-business","tag-contribution","tag-default","tag-election","tag-employer","tag-finance","tag-from","tag-get","tag-government","tag-increase","tag-kiwisaver","tag-lead","tag-money","tag-more","tag-national","tag-nationals","tag-new-zealand","tag-newzealand","tag-nz","tag-party","tag-personal-finance","tag-personalfinance","tag-proposal","tag-proposed","tag-rates","tag-revenue","tag-says","tag-superannuation","tag-tax","tag-to","tag-unknown","tag-will","tag-would"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/150683","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=150683"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/150683\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/150684"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=150683"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=150683"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=150683"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}