Superannuation Scheme
You may be aware of superannuation schemes that are set up to provide an income or payment after retirement to natural persons. If you are in receipt of a superannuation benefit, it would help to understand how you are required to meet your income tax obligations.
Understanding Superannuation schemes
A superannuation scheme is a managed investment scheme under the Financial Markets Conduct Act 2013, and may be registered or unregistered. This is NOT a Kiwisaver Scheme, and may elect to be a PIE, in which case tax treatment would be similar to that of PIE. < PIE>
Tax treatment
Contribution
The contributions to a superannuation fund may be by the employer or employee.
For employees, they receive no deduction for the contribution, however members of a superannuation fund that have a membership criteria similar to that of a Kiwisaver fund may be eligible for a tax credit on their contribution. In this case, the savings cannot be withdrawn until retirement.
For employers, the superannuation contributions made on behalf of the employee are tax deductible in the year of payment, subject to certain variations if applicable. This also include the superannuation contribution tax (ESCT) payable by the employer.
Investment income
The trustee of the scheme is required to ensure the scheme fulfils the tax obligations.
Distributions
Distributions from a trust are not taxable in the hands of the beneficiary, unless specific exclusions apply.
Employer Superannuation Contribution Tax
This is payable by the employer on the cash contribution to the superannuation scheme and is tax deductible. This is deducted at the relevant rate per the legislation, if the employee does not wish for it to be treated as salary or wages, in which case the regular PAYE rules apply.
Please note that the above does not constitute specific tax advice and only intends to be a general advice. If you require specific advice related to your situation, please reach out to our tax consultant using the ‘contact us’ option.
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