The Government has introduced a new top personal income tax rate of 39% which will apply to personal annual income that exceeds $180,000 from 1 April 2021. This change also requires changes to other tax types to ensure that the new top personal tax rate applies consistently across the personal tax system.
If you are a member of the Mercer Super Trust or have a KiwiSaver account and your income is $216,000 or more you may be impacted by the changes to the employer’s superannuation contribution tax (ESCT) which applies to superannuation 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.
What does this mean for you?
The level of employer contributions will stay the same, but if you are earning more than $216,000 a year, the amount you will 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 current income thresholds and tax rates that will be applied to employer contributions are:
INCOME RANGE* |
ESCT RATE |
$0 - 16,800 |
10.5% |
$16,801 - $57,600 |
17.5% |
$57,601 - $84,000 |
30% |
$84,001 - $216,000 |
33% |
$216,001 and over |
39% |
* Annual salary or wages plus gross employer contributions paid to employee in previous tax year
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 Mercer Super Trust or Mercer KiwiSaver scheme 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.