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Income Tax Act 2007

General collection rules - Employment-related taxes - Calculating amounts of tax

RD 70: Calculating amounts of tax on failure to withhold

You could also call this:

“How to calculate tax owed when not enough was withheld from superannuation contributions”

If you, as an employer, person, or PAYE intermediary, don’t take out the right amount of tax for an employer’s superannuation cash contribution, this is what happens. The tax you should have taken out is worked out using a special calculation.

The calculation looks like this: You take the tax rate and divide it by 1 minus the tax rate. Then you multiply this by the amount of money that was put into the superannuation fund. Finally, you subtract any tax that has already been paid.

The tax rate used in this calculation is found in schedule 1, part D of the law. It’s the rate that was in place when the contribution was made.

When we talk about the ‘contribution to fund’, we mean the amount of money that was put into the superannuation fund, not including any tax.

‘Tax already paid’ means any tax for this contribution that has been paid already.

This calculation helps figure out how much tax should have been taken out, so you can make sure the right amount of tax is paid.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1520174.

Topics:

Money and consumer rights > Taxes

RD 69: Choosing different rates for employer's superannuation cash contributions, or

“Selecting different rates for employer super contributions (no longer applies)”

RD 71: Amounts of tax treated as paid to and received by superannuation funds, or

“Tax rules for superannuation fund payments and contributions”

Part R General collection rules
Employment-related taxes: Calculating amounts of tax

RD 70Calculating amounts of tax on failure to withhold

This section applies when an employer, person, or PAYE intermediary does not withhold under section RD 65(3) an amount of tax for an employer's superannuation cash contribution.
The amount of tax is calculated using the formula—
$(tax rate ÷ (1 − tax rate) × contribution to fund) − tax already paid.$

Where:
In the formula,—
tax rate is the basic rate set out in schedule 1, part D (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits) at the time the contribution was made:
contribution to fund is the amount of the contribution received by the superannuation fund excluding the amount of tax:
tax already paid is any amount of tax for the contribution that has already been paid.

Compare

2004 No 35 s NE 5

Notes

Section RD 70(1): substituted (with effect on 1 April 2008), on 6 October 2009, by section 523(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RD 70(1): amended (with effect on 1 April 2008), on 2 November 2012, by section 144(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section RD 70(3)(a) tax rate: amended, on 1 April 2008, by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section RD 70 list of defined terms basic rate: repealed, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section RD 70 list of defined terms employer's superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 523(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section RD 70 list of defined terms employer's superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 523(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).