ESCT — Employer Superannuation Contribution Tax
Updated for 2026 IRD rates
What ESCT Is
Employer superannuation contribution tax (ESCT) is the tax your employer pays on the contributions it makes to your KiwiSaver scheme or a complying fund. It is not deducted from your wages. ESCT comes out of the employer's contribution before the money is credited to your account, so what you see on your KiwiSaver statement is the employer contribution net of ESCT.
Employers must also apply ESCT to contributions to complying funds — superannuation schemes with KiwiSaver-like rules where savings are locked in until you are eligible for NZ Super.
ESCT does not apply to the money you ask your employer to deduct from your own pay. That is your contribution, not an employer contribution, and it is dealt with under the normal employee deduction rules.
ESCT Rate Table — from 1 April 2025
The rate is set by the employee's taxable income in the previous income year, plus the gross employer contributions paid for them in that year. It is a single flat rate on the whole employer contribution — not a tiered scale like income tax brackets.
| Income in the previous year (salary/wages + gross employer contributions) | ESCT rate |
|---|---|
| Up to $18,720 | 10.5% |
| $18,721 – $64,200 | 17.5% |
| $64,201 – $93,720 | 30% |
| $93,721 – $216,000 | 33% |
| $216,001 and over | 39% |
The thresholds were widened from 1 April 2025 to line up with the personal income tax changes announced in Budget 2024. The old boundaries were $16,800 / $57,600 / $84,000 / $216,000. Anyone whose income fell in one of the three gap ranges — $16,800–$18,720, $57,600–$64,200 or $84,000–$93,720 — moved down a bracket on 1 April 2025 and now gets a larger net employer contribution for the same gross contribution.
For a new employee, or someone who has worked for you for less than a year, an employer uses the rate that matches the annualised value of their pay plus employer contributions. The employer does not need to know what the employee earns in any other job.
Worked Example — $85,000 Salary
An employee on $85,000 with a 3.5% employer contribution:
| Step | Amount |
|---|---|
| Gross employer contribution (3.5% of $85,000) | $2,975.00 |
| ESCT rate (before 1 April 2025: 33%) | 30% |
| ESCT deducted | $892.50 |
| Credited to the KiwiSaver account | $2,082.50 |
Before 1 April 2025 the same employee's entire employer contribution was taxed at 33% ($981.75), leaving $1,993.25. The threshold change is worth $89.25 a year, and it compounds with investment returns for the rest of the employee's working life.
Where the income sits matters: $63,000 of salary plus $2,205 of employer contributions totals $65,205, which lands in the 30% band rather than 17.5%. Income plus employer contributions is what the table is measured on.
How ESCT Is Deducted
Employers have two lawful methods:
- Deduct from each contribution — every time a contribution is made, work out ESCT at the employee's rate and pay the net amount to the KiwiSaver scheme. This is the standard approach.
- Gross-up into salary — include the employer contribution in the employee's gross salary or wages and withhold tax under the ordinary PAYE rules. Used less often, generally where an employer wants the contribution treated as part of remuneration.
ESCT is paid to IRD through the employer's normal employment information (payday filing) process, alongside PAYE and the employee's KiwiSaver deductions. It is a deductible business expense for the employer.
Where ESCT Does and Does Not Apply
- Applies: employer contributions to KiwiSaver schemes and complying superannuation funds.
- Applies: employer contributions made while an employee is on a savings suspension, if the employer chooses to keep contributing — they must still pay ESCT on them.
- Does not apply: employee contributions, whether compulsory or voluntary, or money the employee simply asks the employer to deduct from pay for a superannuation scheme. Those are not employer contributions.
- Does not apply: a savings suspension stops compulsory employer contributions (CEC) and the associated ESCT while the notice is in force.
If an employee is put on a savings suspension and the employer has already paid CEC and ESCT, the CEC is refunded by IRD automatically once the suspension is notified. The ESCT needs a refund request — through the Employment information amendments (IR344) form or by contacting IRD.
How the 3.5% Rate Rise Interacts with ESCT
The default employee and employer contribution rate rose from 3% to 3.5% on 1 April 2026, and rises to 4% on 1 April 2028. A higher gross employer contribution means a higher ESCT amount in dollar terms even where the rate itself is unchanged — which is why a payslip that shows a bigger gross employer contribution can still show a modest increase in what reaches the KiwiSaver account.
| Salary | Employer 3.5% (gross) | ESCT rate | ESCT | Net to KiwiSaver |
|---|---|---|---|---|
| $18,000 | $630.00 | 10.5% | $66.15 | $563.85 |
| $60,000 | $2,100.00 | 17.5% | $367.50 | $1,732.50 |
| $85,000 | $2,975.00 | 30% | $892.50 | $2,082.50 |
| $120,000 | $4,200.00 | 33% | $1,386.00 | $2,814.00 |
| $250,000 | $8,750.00 | 39% | $3,412.50 | $5,337.50 |
Common Mistakes
- Thinking ESCT comes out of your pay. It does not — it reduces the employer's contribution, not your wages.
- Using the old thresholds. The 1 April 2025 boundaries are $18,720 / $64,200 / $93,720 / $216,000. Software that was never updated still applies the pre-2025 ones.
- Applying tiered brackets. ESCT is one flat rate on the whole employer contribution, so crossing a threshold changes the tax on the entire contribution, not just the portion above the line.
- Ignoring the employee's other jobs. The rate is based on what you pay the employee plus the employer contributions you make. Other employers' figures are not part of the calculation.
- Forgetting ESCT on a voluntary employer contribution. Any employer contribution attracts ESCT, voluntary or compulsory.
If the wrong rate has been used, the employer corrects the employment information and IRD reconciles the difference. Small errors are common after a rate threshold change and are straightforward to fix — the important thing is that they are fixed in the same income year wherever possible.
Related Guides
Deep dive — 2026 update
ESCT vs PAYE: two different taxes on the same payslip
PAYE and ESCT look similar on a payslip and are filed through the same employment information, but they tax different things. PAYE is the employee's income tax on gross salary or wages, withheld by the employer. ESCT is a final tax on the employer's superannuation contribution, and because it is final, the employer contribution is not included in the employee's assessable income and is not taxed again. That is why a KiwiSaver member does not declare employer contributions on an IR3.
The rate election question
Because the ESCT rate is driven by the previous year's income plus employer contributions, employees whose pay has dropped — a change from full-time to part-time, a period of parental leave, a redundancy — can spend a year on a rate that no longer matches their earnings. The mechanic to know is that the rate is set on last year's figures by law, not on what you expect this year. If you think your rate is wrong, talk to your employer's payroll team first; they are the ones who calculate and remit it, and they can confirm which rate they have on file and why.
Why the thresholds shifted in 2025
When Budget 2024 widened the personal income tax brackets, the ESCT thresholds were widened to match, but the change was deferred to 1 April 2025 to reduce payroll compliance costs — the same reason the PIE prescribed investor rate thresholds moved on that date. For a $85,000 earner the result was a drop from 33% to 30% on the entire employer contribution; for a $60,000 earner nothing changed because $60,000 was already inside the 17.5% band. The practical test is simple: if your income landed in $16,800–$18,720, $57,600–$64,200 or $84,000–$93,720 on the old table, you moved down a bracket.