Employer’s superannuation contribution tax – changes on 1 April 2025

Overview

Effective 1 April 2025 (and as announced in Budget 2024) the income ranges for determining the rate of employer’s superannuation contribution tax (ESCT) which must be deducted from an employer’s contribution to a workplace savings or KiwiSaver scheme for an individual employee’s benefit  will increase. 

These changes are linked to the personal income tax (PIT) changes that took effect on 31 July 2024 and have reduced PIT for all people receiving over $14,000 a year in taxable income[1].

 For some employees (as explained below) the effect of the ESCT changes will be to:

• reduce the rate of ESCT payable on their employer’s superannuation contributions, and
• as a result, increase the after-tax employer contribution amount credited towards their retirement savings.

What is changing?

The basis for calculating ESCT rates will not change – the rates will continue being based on:

• the before-tax earnings and superannuation contributions which an employee received from their current employer during the last income year (1 April to 31 March), or
• if that employer did not employ the employee for all of the last income year, its estimate of the before-tax earnings and superannuation contributions that it will pay for the employee’s benefit in the current income year.

Additionally, the ESCT rates themselves will not change.

However, the income ranges (calculated as set out above) for applying the different ESCT rates[2] will change as follows:

¹ The Government deferred the corresponding ESCT changes until 1 April 2025 to minimise compliance costs for employers.

² Importantly, an ESCT rate is not applied in the same ‘tiered’ way as PIT rates - only one ESCT rate applies to the total amount of  your employer’s superannuation contributions for your benefit. 

What does this mean for you?

The after-tax employer contribution amount credited towards your retirement savings may increase from 1 April 2025 due to a lower ESCT rate applying to your employer’s contributions.

You will be favourably impacted in this way if – though only if – your total earnings and employer superannuation contributions (calculated as set out above) are within one of the following ranges:

• $16,800 to $18,720
• $57,600 to $64,200, or
• $84,000 to $93,720.

Example

If your total earnings and employer superannuation contributions  are $85,000 then:

• your employer’s contributions are currently subject to ESCT at the rate of 33% (with 67 cents in each dollar credited towards your retirement savings), and
• from 1 April 2025, your employer’s contributions will be subject to ESCT at the rate of 30% (with 70 cents in each dollar credited towards your retirement savings).

Is there anything you need to do?

No – you do not need to tell Mercer what your correct ESCT rate is. Your employer will deduct ESCT at the required rate before the after-tax portion of its superannuation contributions is then paid to Mercer for crediting to your retirement savings account in the NZAS Retirement Fund.

Your payslip should state both the amount of ESCT deducted and the after-tax employer contribution amount paid for crediting to that account.  

To find out how the ESCT changes may impact the after-tax value of your employer’s superannuation contributions please talk to your employer.