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Record keeping for KiwiSaver

Keeping track of KiwiSaver amounts for individuals and contributions for employers is key in ensuring you are receiving the money you are entitled to.

Individuals can view contributions made through their My KiwiSaver account. My KiwiSaver shows contributions when they have been processed through an employers payroll report. This can take up to three months from the time they are deducted from the person’s salary or wages. Individuals will need to contact their provider if they wish to know the overall balance, investment returns and to see contributions made directly to them.

Employers are required to keep records for their employees with KiwiSaver for seven years. These are;

  • Their contribution rate.
  • The amounts you’ve deducted.
  • Savings suspension notices.
  • Opt-out requests.
  • Compulsory and voluntary employer contributions.
  • The amount of ESCT (employer superannuation contribution tax) deducted from the employer cash contributions made.

Employers PAYE records should show the KiwiSaver amounts they have deducted and passed on to the IRD or complying fund.

Posted on 4 December '19 by , under super. No Comments.

Paying resident withholding tax 

Resident withholding tax (RWT) is the tax deducted on interest paid to New Zealand tax residents on their deposit accounts. Your bank, fund manager, or a custodian deducts RWT from your interest or dividend amount before they pay you.

The amount of RWT you have to pay varies for each person depending on your tax status, the type of interest or dividends you earn, and the information given to your bank or fund manager. If you pay the wrong tax rate, you could face extra bills at the end of the tax year. You need to tell your provider (bank, fund manager or financial advisor) your IRD number and the tax rate you should pay based on your income. In the case of a joint investment shared with someone else, you pay the tax rate of whoever earns the most money.

The rates for RWT are:

  • Income of $14,000 or less: 10.5%
  • Income between $14,001 to $48,000: 17.5%
  • Income between $48,001 to $70,000” 30%
  • Income over $70,000: 33%

It is important that you let your provider know your RWT rate, as if no rate is elected, you will pay a default of 33%, which may be more than you would otherwise pay. In certain circumstances, the tax rate can be 0% for some people. Your provider will deduct tax on your behalf at least once a year when they calculate the interest or dividends you have earned.

Posted on 27 November '19 by , under tax. No Comments.

Kiwisaver for employers

If an employee is a KiwiSaver member making contributions from their pay, employers must also make a contribution every time they pay their employee salary or wages. These compulsory employer contributions (CEC) are at a minimum rate of 3% of the employee’s gross salary or wages. CEC is not compulsory if the employee is under 18, or if they are a member of a defined benefit scheme.

Employers paying contributions to KiwiSaver are liable for employer superannuation contribution tax (ESCT). Rates have to be calculated for each employee, as it depends on how much the employee earns and how long they’ve worked for. ESCT does not have to be paid if the employer and employee are under agreement to treat part of or all of the contributions as salary or wages under PAYE rules.

When an employee reaches the age of entitlement for New Zealand, employers no longer have to pay CEC unless they have an agreement with the employee to continue payments, want to voluntarily continue paying contributions, or if the employee is aged 60 or over who joined KiwiSaver before July 2019.

Employers can stop making CEC if the government or employee provides an approved savings suspension notice, or if an employee provides a non-deduction notice (KS51) because they are eligible to withdraw from their savings. If employers choose to continue paying contributions voluntarily, they still have to pay ESCT on them.

Posted on 7 November '19 by , under super. No Comments.

How to create an effective social media calendar

Having a well-planned and engaging social media presence is nowadays a core aspect of marketing. With 77% of consumers more likely to buy from brands they follow on social media, it is important to plan your content ahead of posting to maintain a successful social media campaign, avoid any mistakes and ensure posts will help you achieve your business goals. Creating an effective social media calendar will often involve four key areas that can help you make the most out of your social media presence.

Key information:
This is normally presented in a table format that provides details of what is being posted, such as the date and time for posting, content type, hashtags, the image and text to be posted and what platforms it is being shared on. It is also useful to integrate an evaluation section you can fill in after each post has been made that provides information such as reach, engagement, shares, comments, reaction, follower increase/decrease.

Plan content strategy:
It is a good idea to have a strategic content plan rather than just sharing whatever you feel like. This can involve determining which topics your content can cover and when, investigating the needs and wants of your audience and catering to them, and what order posts should be shared in.

Content check:
When planning future content, remember that posts that may be relevant now may not be so appropriate by the time you actually post them. Check if any of the content is out of date and whether it can be updated or should be deleted. For more variety, try planning posts around a special event or holiday that is coming up to make content more interesting.

Posted on 30 October '19 by , under General News. No Comments.

Are you eligible for the R&D Tax Incentive?

This 2019-20 income year, the government introduced a new research and development (R&D) Tax Incentive that businesses can apply for. The government aims to encourage innovative businesses and a more productive economy by raising R&D expenditure to 2% of New Zealand’s Gross Domestic Product (GDP) by 2027.

The scheme offers a credit rate of 15% on any eligible research and development practices, with a $120 million cap on eligible expenditure. The incentive includes state-owned enterprises, industry research cooperatives, levy bodies, and minority-owned subsidiaries of select crown entities.

To be eligible for the new R&D Tax incentive, the following requirements must be met:

  • A core R&D activity must be intended to create new knowledge, or improved processes, services or goods.
  • The R&D is trying to resolve a scientific or technological uncertainty, where experts in the area do not know the answers or possibilities.
  • A minimum spend of $50,000 on R&D. However, to ensure that even small businesses can qualify for the R&D tax credit, there is no minimum spend if the business uses an approved research provider. A list of approved research providers can be found on the Inland Revenue website.
  • A systematic approach is used to undertake R&D. This involves a methodical approach that is planned, structured and documented, which could involve prototyping, experimentation or analysis that tests and evaluates possible solutions.
  • The activities being undertaken in R&D are predominantly taking place in New Zealand. Overseas expenditure is limited to 10% of your total R&D expenditure.
  • You own the results of the undertaken R&D or are able to use the results at no extra cost.

Posted on 30 October '19 by , under tax. No Comments.

Early access to KiwiSaver now available for those with life-shortening conditions

At the end of July this year, KiwiSaver announced that savings accessibility will be changed for people with shortened life expectancies due to congenital health conditions.

Under previous rules, savings could not be accessed before the age of 65, however people with life-shortening congenital conditions can have a life-expectancy below this age. As a result, people with such conditions were not joining KiwiSaver, as it was a redundant retirement option for them, or had joined KiwiSaver and were not able to withdraw their savings when needed.

The change allows people with life-shortening conditions to withdraw their savings at whatever age they choose to retire, and enable them to support a comfortable retirement with the benefits associated with KiwiSaver. While part of KiwiSaver’s success as a retirement savings scheme has been credited to only being able to access funds after you turn 65, this system does not take into account different health and retirement situations. The update acknowledges citizens’ different living circumstances and aims to make the system fairer for people who may otherwise be at a disadvantage.

The new withdrawal policy has a set list of conditions outlined that would automatically qualify certain users to be able to access their savings early. People can qualify for withdrawal by providing a medical certificate or other related evidence to certify early access.

Posted on 9 October '19 by , under super. No Comments.

Updated government tax policy work programme 2019-20

In August this year, the government released an updated tax policy work programme for 2019-2020. The updated version is aimed to encourage productive investment and maintain the quality and efficiency of the tax system. Some of the key workstreams covered in the programme include:

The current land protocols will be reviewed in an aim to improve the efficient use of land and the taxation of land is fair and supports productive investment. This includes clarifying holding costs for taxable land, facilitating compliance with existing land rules, and taking measures to improve revenue collection by improving information flows.

The government aims to focus on prioritising economic performance and minimising the impact of the tax system on businesses by reducing compliance costs. The programme deals with increasing the integrity and neutrality of the system and improving the economic achievements of small businesses and firms.

Environment/Sustainable Economy:
This workstream will look at how different tax regimes could make positive environmental impacts, noting where greater environmental taxation could change behaviour and raise money for environmental purposes. This includes a review of the Emissions Trading Scheme and revising the Waste Disposal Levy.

Posted on 30 September '19 by , under tax. No Comments.

Introduction of new KiwiSaver Bill

The Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill contains proposals to simplify and modernise the administration of KiwiSaver. The Bill proposes a number of changes to improve the administration of the KiwiSaver scheme, facilitating faster transfers of funds, improving the administrative efficiency and enhance members’ experience with the scheme.

The implementation of a new information technology project known as Business Transformation (BT) has allowed Inland Revenue (IRD) to detect more clearly what rate of tax that people should be paying on their KiwiSaver accounts and other investment savings.

Though the New Zealand tax system has a broad-base, low-rate framework, the IRD has identified that approximately 1.5 million people have been paying the wrong prescribed investor rate (PIR) on their KiwiSaver accounts and other managed funds.

Currently, KiwiSaver investors and others with savings in Portfolio Investment Entities must be the ones to notify savings providers of their appropriate PIR tax rate. As many individuals do not do this step, they are charged the default rate of 28%. The tax paid is final and any overpayment cannot be refunded.

The proposed law will allow for the IRD to notify the provider to correct the PIR from 1 April 2020. The IRD has also announced that from mid-July it will begin contacting taxpayers who are on the wrong rate.

Posted on 10 September '19 by , under super. No Comments.

Changes to IRD interest rates

From 29 August 2019, the interest IRD charges when tax is unpaid or underpaid is increasing from 8.22% to 8.35%. This is often referred to as use of money interest (UOMI) AND applies to most tax obligations such as income tax, PAYE, FBT, withholding taxes and GST. The new rate comes as part of the Order in Council changes made on 1 July 2019.

Along with the use of money interest rates payable on underpayments of tax being increased, the rate of interest for overpayments of tax will decrease from 1.02% to 0.81%. Late payment penalties will also apply if a taxpayer does not pay on time. IRD late payment penalties work as such:

  • One per cent the day after payment was due.
  • An additional four per cent if the tax, including late payment penalties, is still outstanding after seven days.
  • A further one per cent every month after.

The last IRD interest rate change was in March 2017. The new rates are based on the floating first mortgage new customer housing rate and the 90-day bank bill rate. Both are determined by the market and can move independently of each other and the Official Cash Rate.

Taxpayers can be entitled to a deduction for their UOMI payments for the interest paid on underpayments of tax, provided the deduction is made in the year the UOMI is paid.

Posted on 3 September '19 by , under tax. No Comments.

Use KiwiSaver to buy your first home

You may be entitled to the KiwiSaver HomeStart Grant after you have been contributing to your KiwiSaver for three years. The Grant is administered by Housing New Zealand which operates outside of KiwiSaver and will be paid to your solicitor.

What are the grants?
There are two HomeStart Grants. These are:

  • For purchasing an existing home, it is between $3,000 and $5,000 based on $1,000 each year of KiwiSaver membership.
  • For building or purchasing a new home or for purchasing land to build a home on, it is doubled to $2,000 per year of membership. This can be up to a maximum of $10,000 for five years of membership.

To be eligible for the HomeStart Grant, you must be a member of KiwiSaver, another complying superannuation fund or exempt employer scheme, be 18 years or older, and have not received a HomeStart Grant or a KiwiSaver withdrawal before. You must have contributed the minimum percentage of your income to a KiwiSaver scheme for at least three years, although they do not need to be consecutive. You must have a household income, before tax, of less than $85,000 per year for one person, or less than $130,000 per year for two or more people. You must have a deposit that is 10% or more of the purchase price, including the addition of the grant. You should note that income and house price caps will also apply.

In some circumstances, you may still be eligible for the HomeStart Grant if you’ve owned a house before. Housing New Zealand will need to determine if you are in the same financial position as a first home buyer. For further advice or information, consult your financial advisor.

Posted on 12 August '19 by , under super. No Comments.