Is my boss dodging their full share?

There are penalties if employers shortchange their tax obligations, and this

includes KiwiSaver

QI am contributing 3 per cent to KiwiSaver through my job. My payslip shows the employee and employer contributions to KiwiSaver are for the same amount. But in my account the employer's contribution is several-hundred dollars less than my contribution. Why is this? Are there any consequences if an employer avoids making their full contribution?

AIt is good to hear from readers who are keeping track of their KiwiSaver contributions! It sounds like you are checking your KiwiSaver contributions online through your provider. You can also see your contributions (closer to source) by setting up a MyIR login on the IRD website. T

his not only allows you to track your KiwiSaver contributions, you can also find out if you are due a tax refund each year. It is easy to set up a MyIR login – go to www.ird.govt.nz and follow the instructions.

The reason that the total from your employer is less than your own is the way each contribution is taxed. Your contribution is based on your gross income including bonuses, commission, extra salary, gratuity, overtime and any other remuneration, except for redundancy payments.

If you are contributing 3 per cent then that percentage of your earnings is diverted into KiwiSaver before the tax is deducted. Your employer contribution is calculated separately. Their contribution is also 3 per cent but what you get is after tax — known as employer superannuation contribution tax (ESCT). This means that the total paid into your account from employer contributions will always be less over the course of a year. A member who is contributing 4 per cent or 8 per cent will see an even bigger difference.

If your employer uses a good payroll system then all the calculations are done for them, and all they need to do is send their monthly payment to IRD along with the employer schedule.

You are fortunate that you get a payslip — not all employees do. Employers don’t have to provide their staff with a payslip (unless it’s in the employment agreement).

Anyone who does not get a payslip can ask their employer to give them a copy of their wages and time records, and holiday and leave records (which the employer must keep). These records will show pay rate, hours worked and how much they were paid, as well as holiday and leave information.

There are penalties if employers short-change their tax obligations, and this includes KiwiSaver. IRD staff can help employers meet their obligations, but they also expect employers to take some ownership for understanding their responsibilities — just as they would with health and safety requirements or complying with employment laws.

If employers flaunt the rules and do not take steps to correct any errors, then they are penalised.

Shelley Hanna is the communications manager with Peak Portfolio Management Ltd, which is a financial advice provider licensed by the Financial Markets Authority. Disclosure information is available at www.peak.net.nz or call 06 8703838. The information provided in this article is of a general nature and should not be relied on as a recommendation to invest in a financial product. Send your KiwiSaver questions to shelley. hanna@peak.net.nz