Taxable allowances and how they affect the KiwiSaver calculation

ANSWER ID:13911

As from 1 April, 2008, the Inland Revenue Department (IRD) introduced a new rule relating to salary and wages.

This ruling changed the definition of "Gross Pay" which it now defines as "total salary including; bonuses, commissions, extra salary gratuities, overtime and any other remuneration of any kind before tax".

The only exclusions from the Gross Pay are; "Redundancy payments, accommodation benefits or allowances and overseas living costs."

By making this change, the calculation of KiwiSaver was effected, especially by the payment of an accommodation allowance. Allowances such as accommodation allowances or the value of benefits such as a house should NOT be included in the calculation of KiwiSaver but should be included in the calculation of Gross earnings for PAYE calculation.

MYOB Payroll currently is unable to exclude accommodation allowances in the KiwiSaver calculations, so the following workaround is required.

There are currently two options available to use as a work-around.

1. Manually override the quantity, in other words 'Gross', used for KiwiSaver calculation each time you run a pay for the employee with the allowance.
   

   

   The KiwiSaver Pay Defaults cannot be made Regular, to prevent users paying wrong amounts.

   
   
2. You can continue to calculate the KiwiSaver deductions and the employer super based on the total gross. The employee would have to agree to this from 1 April and the employer would have to be happy with this as well. In the future employer super could be factored in when establishing the value of the accommodation.