Pre-tax deductions and KiwiSaver salary sacrifice
With Smartly payroll, you can configure deductions and benefits to support KiwiSaver salary sacrifice, KiwiSaver top-ups, and other pre-tax deductions. This article explains what each option means and how to set them up.
To find deductions, go to Payroll Settings > Pay Components > Deductions.
Understanding the options
When creating or editing a deduction, you’ll see three checkboxes:
- Pre-Tax – makes the deduction occur before tax is calculated.
- KiwiSaver Salary Sacrifice – flags the deduction as a KiwiSaver salary sacrifice.
- KiwiSaver Top Up – flags the deduction as a KiwiSaver top-up.
For benefits, there is one additional checkbox:
- KiwiSaver Top Up – flags the benefit as a KiwiSaver top-up.
These settings ensure your payroll calculations are compliant and accurate.
Deduction types and how they apply
1. KiwiSaver Salary Sacrifice
- Pre-Tax: Yes
- KiwiSaver Salary Sacrifice: Yes
- KiwiSaver Top Up: No
- Amount Basis: Percentage of gross taxable income
2. KiwiSaver Top Up
- Pre-Tax: Yes
- KiwiSaver Salary Sacrifice: No
- KiwiSaver Top Up: Yes
- Amount Basis: Percentage of gross taxable income
3. Other Pre-Tax Deductions (e.g., WorkRide scheme)
- Pre-Tax: Yes
- KiwiSaver Salary Sacrifice: No
- KiwiSaver Top Up: No
- Amount Basis: Fixed dollar, percentage of standard pay, or percentage of gross taxable income
How to set up deductions
- Go to Payroll Settings > Pay Components > Deductions.
- Create or edit a deduction.
- Select the relevant checkboxes:
- Salary Sacrifice → Pre-Tax + KiwiSaver Salary Sacrifice
- Top Up → Pre-Tax + KiwiSaver Top Up
- Other pre-tax (e.g. WorkRide) → Pre-Tax only
- Choose the correct Amount Basis (see table above).
- Add any additional options as needed (e.g. direct credit).
- Save.
How to set up benefits
- Go to Payroll Settings > Pay Components > Benefits.
- Create or edit a benefit.
- Tick the KiwiSaver Top Up checkbox.
- Set the Amount Basis to % Gross Taxable.
- Save.
- As with deductions, apply the benefit to employees by enabling it in contract groups and assigning it in the employee payment screen.
Examples
WorkRide Scheme (Pre-Tax Deduction) → Pre-Tax only.
KiwiSaver Salary Sacrifice → Pre-Tax + KiwiSaver Salary Sacrifice.
KiwiSaver Top Up → Pre-Tax + KiwiSaver Top Up.
Other pre-tax deductions
Some deductions outside KiwiSaver can also be set up as pre-tax:
- 8% Holiday Pay – already included in hourly/annual salary. No separate deduction required.
- Company Car – set up as Pre-Tax only.
- Child Care – set up as Pre-Tax only.
Tip: If the deduction isn’t KiwiSaver or Superannuation related, use the Pre-Tax option only.