Information for Boards in regard to retirement savings
Specific information on the various schems and applicabilty in the education sector is contained in the payroll website.
Below is a copy of a letter sent to boards in late March 2009 regarding the changes to KiwiSaver. Changes were also been made to the template letters of offer to align with this advice.
Dear Board of Trustees or Principal
1 April 2009 changes affecting schools
Changes that affect all employers are being introduced from 1 April 2009 and include:
• changes to KiwiSaver
• the introduction of a new independent earner tax credit (IETC), and
• changes to PAYE rates and thresholds.
This letter gives you an overview of these changes, and includes an up-to-date copy of the KiwiSaver Employee information pack (KS3), a new Tax code declaration (IR330) form including the IETC tax codes, and a poster about IETC you may display to your staff.
KiwiSaver changes from 1 April 2009
The main changes to KiwiSaver affecting schools are:
• The minimum employee contribution rate will reduce to 2% of a member’s gross pay.
• The compulsory employer contribution will increase to 2%. It will no longer increase in future years.
• The employer tax credit will be removed.
To meet your KiwiSaver obligations from 1 April 2009, you’ll need to do a few things.
• Make sure your employer contribution to KiwiSaver is at least 2% from 1 April 2009. Contributions will automatically increase for employees you pay through the education service payroll. If you pay employees through an independent payroll, make sure your payroll provider increases your compulsory employer contributions to 2%.
• If asked, help existing employees to reduce their KiwiSaver contributions to 2%. Employees need to complete a new KiwiSaver deduction form (KS2) if they want to change their KiwiSaver contribution rate.
For employees you pay through the education service payroll, send copies of all completed KS2 forms to your pay centre, and file the originals in your employees’ files.
If you pay employees through an independent payroll, keep all KS2 forms on your employees’ files and tell your payroll provider to make the requested changes to employees’ contribution rates.
New employees automatically enrolled after 1 April 2009 who don’t select deduction percentages on their KS2 forms will have contributions deducted at the default rate of 2% of their gross pay.
You don’t need to contact Inland Revenue to process these changes.
• Use the new information provided. Enclosed is a copy of the new green KiwiSaver Employee information pack (KS3) that you need to give to all new employees and current employees from 1 April 2009, who ask about joining KiwiSaver. Copies of the KS3 will be available from 1 April from the “Forms and guides” section at http://www.ird.govt.nz/, or you can call INFOexpress on 0800 257 773 to order printed copies. Both the http://www.ird.govt.nz/ and http://www.kiwisaver.govt.nz/ websites will be updated from 1 April 2009. The Employer guide (KS4) will be available on both websites from 6 April. You can order printed copies from the end of April.
Please dispose of any old KS3s and KS4s you may have in an environmentally friendly manner.
Prevent penalties by ensuring independent payrolls pay KiwiSaver deductions and contributions in full and on time from 1 April 2009.
IETC & tax rate changes from 1 April 2009
If you pay employees through an independent payroll, make sure the applicable new PAYE rates and any changed tax codes apply to payments for pay periods from 1 April 2009. The new tax codes for the IETC are ME, and ME SL for employees with student loans.
The IETC provides an extra $10 a week for New Zealand tax residents earning between $24,000 and $48,000 who aren’t eligible for Working for Families Tax Credits and aren’t receiving an income-tested benefit, NZ Super or a Veteran’s pension.
Employees entitled to receive IETC through their wages or salaries will need to complete IR330 forms to change their tax codes.
For employees you pay through the education service payroll, send completed IR330 forms, when applicable, to your pay centre so the updated tax codes for individual employees will apply to the first pay period from 1 April 2009.
If you pay employees through an independent payroll, keep completed IR330 forms on your employees’ files and ensure your employees’ tax codes are updated for the first pay period from 1 April 2009.
New employees starting work during March, who’ll be eligible for the IETC after 1 April 2009, will need to use an existing main income tax code for March. They can then complete new IR330 forms to start using ME or ME SL for their payments from 1 April.
You and your employees can find out more about the changes to personal tax rates and thresholds, and work out whether you’re eligible for the IETC by visiting www.ird.govt.nz/ietc/. Alternatively you can call Inland Revenue’s INFOexpress line 0800 257 700.
Group Manager, Assistance
Manager, Payroll Services
Ministry of Education