Employer exemption from automatic enrolment rules

2010 KiwiSaver amendments to the exempt employer provisions preserve exempt employer status in certain circumstances.

Amendments have been made to the exempt employer provisions to preserve exempt employer status in certain circumstances.


The Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 introduced a provision to ensure that employers could not establish new schemes which are not KiwiSaver schemes for the apparent purpose of circumventing the automatic enrolment rules. It was considered that this behaviour undermined the policy intent of KiwiSaver and the rationale behind the exemption from the automatic enrolment rules. To overcome this concern, the exemption from automatic enrolment was closed to new employers.

However, that amendment was not flexible enough to take into account situations such as mergers and acquisitions, where exempt status would be lost due to the mere fact that the business merged with or was acquired by another body. In addition, exempt status would be lost if an employer moved schemes due to dissatisfaction with the current scheme provider.

These amendments address these concerns, by ensuring that exempt employer status is not automatically lost in certain situations, while still ensuring that employers cannot establish new schemes to circumvent the automatic enrolment rules.

Key features

Section 25 of the KiwiSaver Act describes the eligibility criteria the Financial Markets Authority considers in granting an employer exempt status. In ensuring that no employers establish new schemes, the requirement that schemes must be registered by 7 October 2009 remains.

Section 29 describes how to apply to be an exempt employer. New section 29(1) states that a person may apply for approval of an employer (the current employer) to be an exempt employer if three conditions are met:

  • an application (the old application) was received by the Financial Markets Authority on or before 7 October 2009; and
  • as a result of the Financial Markets Authority's consideration of that application, an employer was approved as an exempt employer; and either:
    • the current employer changes schemes, that is, the current employer is the exempt employer; or
    • the current employer is a succeeding employer for that exempt employer due to a merger or acquisition (the successor provision).

This approach ensures that the Financial Markets Authority is given the opportunity to consider new arrangements triggered by a merger or acquisition or an employer changing schemes to ensure that exempt employer status remains with employers that comply with sections 24 to 32.

For example, if a current exempt employer changes schemes, section 29 allows a person to make an application to the Financial Markets Authority provided section 29(1) is complied with. Otherwise the employer's approval for exempt status granted under section 30 may not be operative, as the scheme for which the exemption was given has changed and no longer complies with the rules in section 25.

Equally, in situations of a merger or acquisition, where the employer may change, section 29 now allows a person to make an application, provided the conditions in section 29(1) are met. This process also ensures that exempt employer status remains with employers that comply with sections 24 to 32.

Application date

The amendments apply from 7 October 2009.