Refunds of employer contributions if employee opts out

Clause 535

Submission

(62 – Minter Ellison Rudd Watts)

The amendment to section 100 of the KiwiSaver Act 2006 proposed in clause 535 is unnecessary, as amendments to the Employment Relations Act 2000 cover any situation in which the proposed amendment to section 100 may apply.

Comment

The proposed amendment to section 100 of the KiwiSaver Act requires Inland Revenue to refund to the employer any compulsory employer contributions if an employee opts out of KiwiSaver. Under this proposal, the refund cannot be used to offset tax debt. Section 101B of the KiwiSaver Act specifies that compulsory employer contributions may be paid in addition to an employee’s salary or wage. To avoid the possibility of reducing an employee’s total remuneration, any contributions must be refunded by Inland Revenue to the employer so they can be passed on to the employee. Clause 535 will therefore bring section 100 into line with the amended section 101B.

Recommendation

That the submission be declined.

Submission

(67 – New Zealand Institute of Chartered Accountants)

Clause 535 amending section 100 of the KiwiSaver Act should be deleted.

Comment

As compulsory employer contributions may form part of an employee’s total remuneration package, if an employee opts out of KiwiSaver such contributions must be returned by Inland Revenue to the employer so they are available to be refunded to the employee. The ability to use a contribution to offset tax debt prevents the employer from using it to refund the employee.

Recommendation

That the submission be declined.