Category Archives: Kiwisaver

Annual Tax on KiwiSaver Too High

Today’s must read:
KiwiSaver tax rates need fixing, world’s ‘most punitive’, says savings lobby

A new article in the National Business Review this morning highlights how high the taxes are on KiwiSaver accounts. When KiwiSaver was set up, the government decided to use an annual member tax credit incentive of $1042, but now only $521, instead of a reduced tax rate on earnings in KiwiSaver accounts. Back when balances were small, this was probably preferable, but now that many accounts have gotten larger this $521 a year is not so great. KiwiSaver schemes are taxed the same as PIE funds, so at the investors PIR of 10.5%, 17.5%, or 28%. Continue reading Annual Tax on KiwiSaver Too High

KiwiSaver – Why wouldn’t you?

Every time I read the personal finance columns from Mary Holm and others, I cannot believe that there are still people who are against joining KiwiSaver. Why would you be against free money from the Government? Although not as generous now as it was when first begun, I love getting $521 every year in my account. Plus, your employer will put in some as well. KiwiSaver is the only universal non-employer-sponsored retirement saving vehicle in New Zealand. Employers may have another scheme, but pretty much everyone of working age and younger can join KiwiSaver and benefit.

KiwiSaver is not a tax advantaged scheme like some in other countries. Instead, the government matches your contributions every year up to a maximum (see Member Tax Credit below). Earnings on investments held in the scheme are taxed annually as PIEs or Portfolio Investment Entities. In most cases, these do have a slight tax advantage because the PIE tax rates may be less than marginal income tax rates (This is not an advantage unique to KiwiSaver however).
Continue reading KiwiSaver – Why wouldn’t you?