Tax rules for ESCT from 1 April 2021

Employer superannuation contribution tax (ESCT)

The Government has introduced a new top personal income tax rate of 39% which applies to personal annual income that exceeds $180,000 from 1 April 2021.

If your income is $216,000 or more you may be impacted by the change to the employer’s superannuation contribution tax (ESCT) which applies to superannuation and KiwiSaver contributions made by an employer. 

ESCT is not applied in the same tiered way as personal income tax rates and only one rate applies to the total amount of the employer contribution. 

For example: If your income is $220,000 a year your entire employer contribution will be taxed at 39%.

What does this mean for you?

The level of employer contributions stays the same, but if you are earning more than $216,000 a year, the amount you receive in your retirement savings account from 1 April 2021 may be reduced as a result of a greater amount of ESCT being deducted.

The income thresholds and tax rates that are applied to employer contributions are:

 Income range*

 ESCT rate

 $0 - 16,800


 $16,801 - $57,600


 $57,601 - $84,000


 $84,001 - $216,000


 $216,001 and over


* Annual salary or wages plus gross employer contributions paid to employee in previous tax year

Is there anything I need to do?

No, you do not need to tell Mercer what your correct ESCT rate is. Your employer will make the deductions before the amount is credited to your superannuation account. Your payslip should state the amount of ESCT and employer contributions made to your account.  

To find out how the changes may impact the value of your employer’s contributions please talk to your employer.

This is a great time to review your retirement savings strategy!  Make sure that contributions you are receiving into your retirement savings account are enough to fund your desired lifestyle during your retirement years.

This information has been prepared by Mercer (N.Z.) Limited for general information only. The information does not take into account your personal objectives, financial situation or needs.

3 August 2021