Use the Reversals and Refunds Wizard to reverse and optionally refund KiwiSaver deductions to employees that were automatically enrolled, and then opted out of KiwiSaver.

This can only be used if the contribution has not already been paid to the IRD.

This routine reverses the KiwiSaver contributions from the PAYE Employer Deductions IR345, and the Employer Monthly Schedule IR348, so they are not paid to the IRD.

You are then given a choice of either including the KiwiSaver refund in the employee's pay or handling the refund manually.

Either way, the KiwiSaver contribution is reversed off your PAYE return.

From 1st July 2007 all new employees are automatically enrolled in KiwiSaver unless they are an exempt employee.

These new employees have 8 weeks to opt out of KiwiSaver.

Once opted out, the issue remains of what happens to KiwiSaver deductions that may have been made from an employee's pay before they opted out.

It is this issue that this document addresses.

KiwiSaver deductions are automatically made from an employee's pay, and these deductions are then included in the payment an employer makes to the IRD with their IR345 Employer Deductions Remittance Certificate.

The IR345 payment is made to the IRD either once or twice a month based on the size of the employer, as described in our document Twice Monthly PAYE Returns.

The details of the deductions are communicated to the IRD once a month on the Employer Monthly Schedule, using either the Printed IR348 or by using the online IR-File system.

Note from the above that deductions are paid to the IRD twice a month, but a summary of totals is only sent once a month.

The IRD does not allow negative values for any employees on the Employer Monthly Schedule.

This means that as soon as the possibly twice monthly IR345 Employer Deductions Remittance Certificate is lodged, an employer has lost any ability to directly refund contributions to the employee.

It is Ace Payroll's suggestion that employers are pro-active with regards to new employee membership of KiwiSaver, and check whether an employee wants to opt out of the scheme before their first pay.

We suggest this be done when the employee starts, at the same time they sign their employment agreement, and their IR330 Tax Code Declaration.

We also suggest employers never directly refund contributions, leaving all refunds to the IRD.

Section 20 shown below does allow employers to directly refund contributions to employees that have opted out of the scheme.

Note this is an option for the employer, and not an obligation.