Archive for 'super'

Requesting for your KiwiSaver funds early due to financial hardship

Inland Revenue has announced that those experiencing financial hardship as a result of COVID-19 may be eligible to withdraw their KiwiSaver funds early. In addition to applying for an early release, you can also apply for a KiwiSaver savings suspension in the event that you want to stop further contributions being made from your wages within the first 12 months of experiencing financial hardship.

To be eligible for an early release of your KiwiSaver funds, you must prove that you are experiencing significant financial hardship in the form of you:

  • Being unable to meet minimum living expenses;
  • Being unable to pay the mortgage of the home you live in (and your provider is enforcing the mortgage despite your financial circumstances);
  • Needing to modify your home to meet the special needs of a dependent family member;
  • Needing to pay for medical treatment for yourself or a dependent family member;
  • Having a serious illness;
  • Needing to pay funeral costs for a dependent family member.

Once meeting one or more of the above conditions for financial hardship, you can apply with the Inland Revenue for an early release of your KiwiSaver funds. Keep in mind that if your application is accepted, you can only withdraw your and your employer’s contributions to your KiwiSaver. Your application will also only be considered during the first two months after Inland Revenue has received your first contribution. After the first two months, you will have to contact your KiwiSaver provider. The Inland Revenue recommends contacting your provider for those who are self-employed and pay their own KiwiSaver contributions.

To apply for your KiwiSaver funds early, first gather your relevant information including a list of your assets and liabilities, details of your income and your costs and your bank account details (for a refund if Inland Revenue approves your application). Next, you will need to fill out an application from the Inland Revenue’s website coded KS5 2020 and submit it online or through postal services.

After reviewing your application, you will either receive a confirmation letter with a refund into your bank account or a rejection letter with reasons explaining your ineligibility. The Inland Revenue may also contact you if more information on your financial circumstances is necessary.

Posted on 14 May '20 by , under super. No Comments.

Default KiwiSaver super accounts to increase in investment opportunity

New Zealand’s national super fund, KiwiSaver, has most recently announced the move of their default super accounts from “conservative” to “balanced”. KiwiSaver default super funds have long been “conservative” due to only 10-35% of funds in accounts being invested into growth assets.

However, with the change coming into effect in July 2021, the move to a “balanced” account means that default accounts will be increasing their funds invested in growth assets to 35-63%. The new change to balanced funds is aimed to benefit workers who have five to twelve years horizons.

As over 90% of KiwiSaver users are below the age of 60, experts believe that the transition will be greatly beneficial to youngKiwiSaver account holders, as there is a greater chance for their users to make more money off of investments with their super. With most default accounts being owned by younger workers with many years until retirement, any losses resulting from the change won’t be as impactful as they have time to recoup the losses that might result from a more aggressive allocation of their super funds.

In addition to the super default account changes from “conservative” to “balanced”, KiwiSaver has also announced that they will ban all their super accounts from investing in fossil fuel production and illegal weapons. Investment in companies that only sell but don’t produce fossil fuels like petrol will be allowed.

The ban also comes at a time where New Zealand is transitioning into a lower carbon economy. Experts also believe the ban makes sense in a global business context, as the world moves towards reducing emissions and the risk of investing into stranded assets is high, especially for KiwiSavers account holders with five to twelve years left until their retirement.

Posted on 16 April '20 by , under super. No Comments.

Introducing Better Later Life

Better Later Life – He Oranga Kaumātua 2019 to 2034 is the Government’s plan to provide older New Zealanders with a better quality of living. The strategy was launched on 1 November 2019.

Designed to ensure everyone gets the chance to live well as they get older and create opportunities for everyone to participate, contribute and be valued as they age, the Better Later Life strategy helps to prepare New Zealand for the aging population.

Better Later Life has five key areas for action, based on feedback from nationwide consultations. These areas are:

  • Achieving financial security and economic participation.
  • Promoting healthy ageing and improving access to services.
  • Creating diverse housing choices and options.
  • Enhancing opportunities for participation and social connection.
  • Making environments accessible.

Unlike the previous policy, The Positive Ageing Strategy 2001, Better Later Life also considers the next generation of older people aged 50-64.

Going forward, an action plan will be developed based on the strategy’s key areas. Changes are already being implemented to the SuperGold Card to stretch peoples’ income and the Residential Tenancy Act is being reformed, in addition to the creation of the Age-Friendly community programme.

This strategy has links to other strategies, such as Healthy Ageing Strategy 2016, New Zealand Disability Strategy 2016 and New Zealand Carers Strategy 2008.

Posted on 15 January '20 by , under super. No Comments.

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.

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.

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.

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.

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.

Eligibility:
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.

Understanding KiwiSaver for employers and employees

KiwiSaver is New Zealand’s approach to a taxpayer-subsidised, personal retirement savings regime. Under the scheme, employers make payroll deductions for each employee through the Pay As You Earn (PAYE) tax system. Employees are required to save these to a KiwiSaver account. Here are some of the key features of KiwiSaver that employers and employees should be aware of.

Eligibility:
KiwiSaver is eligible for anyone under the age 65 who is a New Zealand citizen. While people over age 65 cannot join, they can remain as members if they have joined before turning 65. They are also eligible if they are entitled to live in New Zealand indefinitely, and are normally living in New Zealand at the time they join.

Employee contributions:
Employees who are members of KiwiSaver must contribute a minimum of 3% of their gross taxable pay. Individuals can choose to increase the amount to 4%, 6%, 8% or 10%, but can reduce it back to the minimum amount of 3% at any time. Gross taxable pay includes all bonuses, holiday pay and overtime pay. It does not include things such as redundancy pay, accommodation benefits, taxable overseas living or accommodation allowances.

Employer contributions:
While employees must contribute to their own KiwiSaver savings, it is also compulsory for their employers to put money in. These KiwiSaver deductions must be at the default rate of 3% of their pay. However, an employer is not required to make compulsory contributions to an employee’s KiwiSaver if they are already paying into another registered eligible superannuation scheme, the employee is under 18 years or if they are over 65 years.

Posted on 15 July '19 by , under super. No Comments.

Why you should check your KiwiSaver tax rate

Inland Revenue has identified that 450,000 people have been paying the wrong rate of tax on their KiwiSaver accounts and other managed funds. This highlights the importance of understanding what rate of tax you should be paying on your KiwiSaver, and to check that you are paying the correct amount.

The implementation of a new automated tax system has allowed the IRD to detect more clearly what rate of tax that people should be paying on their KiwiSaver accounts and other investment savings. The IRD will be contacting those who have been paying the incorrect prescribed investor rate (PIR) on managed funds like KiwiSaver.

The PIR determines how much tax you pay on your portfolio investment entities (PIEs). Members and their employers both make contributions to KiwiSaver, before the fund manager then invests those both locally and overseas. Any returns are then taxed by the IRD. The prescribed guideline rates are 10.5% for those earning a taxable income of below $14,000, 17.5% for those earning between $14,000 and $48,000, and 28% for those earning over $48,000.

To avoid paying the wrong tax rate, members should work out their estimated income, which will then tell you what your PIR rate is likely to be. You may consider contacting your fund manager to further check the details of what tax rate you are paying and to inform them of your correct PIR, as your income earned from a fund may be taxed at the default rate of 28% without your knowledge.

For further information on taxable income, PIRs and to determine your correct PIR, you should consult your professional tax advisor.

Posted on 18 June '19 by , under super. No Comments.