KiwiSaver

KiwiSaver is a work-based savings initiative designed to encourage New Zealanders to save for their retirement. 

Each new account is credited with a $1000 tax-free contribution from the government, and scheme members are also entitled to a tax credit of $20 per week (or $1040 per year).

Employee Contributions to KiwiSaver

Employer’s deduct 2% of your pre-tax pay, then deposit it into your KiwiSaver account, which can be held with one of a number of fund managers – either your employer’s preferred scheme or one of your choosing. You can only have one KiwiSaver account open at any time.

Employers’ Contributions to KiwiSaver 

Employers make matching contributions of 2% to their employee’s KiwiSaver accounts.

Government Contributions to KiwiSaver

Each new KiwiSaver account is credited with a $1,000 tax-free contribution from the government. KiwiSaver members are also entitled to a tax credit of up to $20 per week (or $1040 per year), which is credited directly to your KiwiSaver account. To receive the full tax credit you must be contributing at least $20 a week to your scheme.

Who Is Eligible for KiwiSaver 

You must be a New Zealand citizen or permanent resident aged under 65 to join KiwiSaver. 

New Zealanders aged 18-65 who are not currently working can contribute to a KiwiSaver scheme, and receive the tax credits and the $1000 kick-start sum. You cannot join KiwiSaver if you are over 65. 

Children under 18 can join KiwiSaver and receive the $1000 kick-start, but not the tax credit. Some schemes allow children to make one contribution at the start but do not require further instalments. 

Contribution Holidays 

Once you have been contributing to KiwiSaver for one year, you can take indefinite “contributions holidays”, but you will not continue to receive the tax credits while you are not contributing to your scheme. 

Accessing Funds 

Most people will not be able to access the funds held in KiwiSaver until they turn 65, except in special circumstances such as moving overseas permanently or significant financial hardship. One-off withdrawals will be allowed to help scheme members buy their first homes, once they have been contributing for three years. First-home buyers who have been contributing to KiwiSaver for three years will also be eligible for a subsidy, but this is subject to caps both on income and the purchase price of the house. 

Tax On KiwiSaver Contributions 

Although your contributions are calculated from your pre-tax pay, you do pay income tax on your KiwiSaver contributions. Like all New Zealand superannuation funds, investment earnings on your KiwiSaver fund are taxed. This is calculated and paid automatically by your scheme provider. 

Once you reach 65, you can take your fund as a tax-paid lump sum. KiwiSaver can help provide an excellent incentive to save for your retirement.
For more information, see the KiwiSaver website - www.kiwisaver.govt.nz.

This article was supplied by Broadbase International Ltd (www.broadbaseinternational.com). Information contained in this article is of a general nature and is not intended as a substitute for professional advice based on your individual circumstances. Disclosure statements are available on request and free of charge.