New Zealand Superannuation Tax Calculation

Lance Watson made this Official Information request to Ministry of Social Development

The request was successful.

From: Lance Watson

Kia ora,

Based on my understanding, the net rate of superannuation is calculated with the following method:

Gross Rate - Tax (rounddown to nearest cent).

As an example, the current Single, Living Alone rate of NZ Super is $578.67 Gross per week. For the M Tax code, the formula for calculating the net rate is as follows (In Excel Formula formatting):

=578.67 - ROUNDDOWN(269.23*0.105 + (ROUNDDOWN(578.67,0) - 269.23)*0.175,2)

269.23 is the tax bracket 14000 divided by 52 to get the weekly tax bracket, and rounded down.

This comes from documentation received from MSD, and can be confirmed by checking current NZ Super rates in MAP, and further confirmed by replacing 578.67 with other M tax code rates to see that the method still works.

My concern here are two components of the calculation.
1. 269.23, it is exceptionally odd in a tax calculation to round a tax bracket before it is put into a calculation, as this means we're using a slightly incorrect tax bracket.
2. ROUNDDOWN(578.67,0), It is fairly common to round down annual income to the nearest dollar when paying tax, but this doesn't apply to weekly/fortnightly amounts. No other benefit type does this. In this instance it means (0.67*52=)$34.84 is going untaxed each year.

My Official Information Request is as follows:
1. Can you confirm the method MSD uses to calculate the net rate of NZS from the gross rate, or if this is calculated in reverse after Annual Gross Adjustment, the method to calculate the gross rate from the net. Especially if the calculation is different from my understanding above.
2. Why does MSD round down the tax bracket when performing the gross to net calculation?
3. Why does MSD round down the weekly/fortnightly gross rate, leaving the remaining cents untaxed?

Ngā mihi,

Lance Watson

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From: OIA_Requests (MSD)
Ministry of Social Development

Tēnā koe Lance Watson,

Thank you for your email received 12 April 2023, under the Official Information Act 1982. Your request has been forwarded to the appropriate officials at National Office to respond.

Ngā manaakitanga,

Official and Parliamentary Information Team | Ministerial and Executive Services
Ministry of Social Development

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