KiwiSaver Contribution Changes: What New Zealand Employers Need to Know

KiwiSaver Contribution Changes: What New Zealand Employers Need to Know

As part of the 2025 Budget reforms and subsequent Inland Revenue updates, KiwiSaver contribution settings are going through significant changes. These affect default contribution rates, eligibility, government contributions, and employer obligations. For New Zealand employers, understanding these updates early will help with budgeting, payroll preparation, and compliance.

Here’s a practical overview of what’s already in motion, what’s coming soon, and what this means for you as an employer.

Key Changes Already Announced

Effective 1 July 2025 the following changes to the Government’s annual KiwiSaver contribution came into effect:

·         The government contribution rate was reduced from 50 cents to 25 cents for every dollar contributed by a member, lowering the maximum annual government contribution from $521.43 to $260.72.

·         Members earning more than $180,000 in taxable income annually no longer qualify for the government contribution.

·         16 and 17-year-olds who contribute to KiwiSaver can now qualify for the government contribution, where previously they did not.

While these changes relate to employee entitlements rather than employer obligations, staff may seek clarification so it’s useful to be prepared to answer questions.

Rising Default Contribution Rates

The default contribution rate for both employers and employees is increasing in staged steps:

From 1 April 2026

·         The minimum compulsory contribution rate rises from 3% to 3.5% of gross salary and wages for both employers and employees.

·         Employers must begin making KiwiSaver contributions for 16 and 17-year-old employees who are KiwiSaver members.

Employers will need to review payroll settings and employee age records to ensure contributions begin at the correct time.

Temporary Contribution Rate Reductions

From 1 February 2026, employees can apply to Inland Revenue for a temporary reduction to remain at a 3% contribution rate from 1 April 2026.

·         As an employer, you’ll be notified by Inland Revenue or receive a certificate from the employee if this reduction applies.

·         You may choose to match the reduced rate but must revert to the default minimum (3.5%) when the employee’s rate increases.

This change introduces additional payroll complexity, so clear internal processes will be essential.

From 1 April 2028

·         The minimum compulsory rate steps up again to 4% for both employers and employees.

Planning ahead for this further increase helps manage cash flow and budgeting across 2027–28.

What Employers Should Do Now

1.      Review and update payroll systems Ensure your payroll software can accommodate changing default rates and temporary employee variations. The 3.5% rate applies from the first pay period on or after 1 April 2026.

2.      Employee eligibility and communication Identify any employees aged 16–17 who are enrolled in KiwiSaver.

3.      Understand temporary rate reduction processes Work with employees who provide Inland Revenue certificates for rate reductions and ensure processes re in place for this.

4.      Educate and inform your workforce Employees may seek clarity on government contribution changes, so having simple explanations ready will support positive communication.

Summary Timeline of Key Dates

 Our team is here to help with modelling the impact and updating your payroll processes.