Beyond the Basics

Member Tax Credits. What are they and how are they calculated?
KiwiSaver providers: default and active choice. You DO have a choice.
2%. 4%, 8% or what? Contribution rates and contributions holidays
KiwiSaver add-ons: mortgage diversion, first home withdrawal, first home subsidy

MEMBER TAX CREDITS

The first thing to know about the member tax credit is that it has nothing to do with tax. It is simply a cash payment from the government, calculated annually and paid into your KiwiSaver account. 

The member tax credit isn‘t a gift like the $1000 kick-start. The government will match your contributions up to a maximum of $20 per week (or $87 per month or $1043 per year). So if you contribute, they contribute. If you don‘t, they don‘t.

There are some exceptions:

• Minors (those under 18) don‘t get member tax credits -- even if they are working and contributing to KiwiSaver.
• If you leave New Zealand to live or work overseas, you will not be eligible for member tax credits while you‘re away, even if you keep on contributing to KiwiSaver. You need to let us know if this applies to you.
• When you get to the age that you‘re eligible to withdraw your savings from KiwiSaver, you can elect to stay in the scheme and you can keep contributing if you like, but you will no longer receive member tax credits.

Calculating tax credits:

If you‘ve been a KiwiSaver member for more than a year, calculating your member tax credit eligibility is simple. As long as you make a contribution some time between 1 July and 30 June, the government will match your contributions to a maximum of $1043. Your contributions can be made up from:

• Employee contributions (through IRD)
• Voluntary contributions (through IRD)
• Voluntary contributions made directly to GMK by cheque and direct debit.

It won‘t matter if your payments are regular or lump sums. The amount does matter though; if you only put in $1000, you‘ll get $1000. It‘s a dollar for dollar match up to a maximum of $1043.

You can make top-up payments directly to GMK by cheque.

How do you know how much you‘ve contributed and how much you‘re eligible for?

• If you make all your contributions directly to GMK via direct debit authority or cheque, you can log on to your account and check your contributions report to see how much you‘ve contributed.
• If you make any contributions through your workplace, or via IRD, you should confirm how much you‘ve contributed by reviewing your payslips, or contacting IRD (0800 549 472.) Please note that the dates on your GMK Contributions Reports refer to when GMK receives your payments, not when deductions were taken or your payments were made to IRD, so they will not be useful for calculating your member tax credit eligibility. 

In your first year of KiwiSaver membership:

In your first year as a KiwiSaver member, your eligibility for member tax credits depends on when you join and start contributing.

A person technically becomes a ‘member’ of a Kiwisaver scheme when either:

•    An account is opened; or
•    Securities are allotted (translation: your contribution is received)

Here are the rules and some examples

These examples are given to enable to you to estimate your member tax credits - IRD calculates your member tax credit based on information we provide and information they hold.

Please use these as a guide only.

When will I see my money? - it won‘t happen overnight, but it will happen

We claim member tax credits in July of each year. Generally the  turnaround between us submitting a claim to IRD and you seeing the money in your account will be about a week. However, in some cases it may take until August (or even September) before we can claim your full entitlement - this is to ensure that all your qualifying contributions have been paid to us (or to IRD).

Back to top

KIWISAVER PROVIDERS: DEFAULT OR ACTIVE CHOICE

It is de Fault of de Government

In the beginning, the Government appointed 6 default KiwiSaver providers. These companies manage the savings of KiwiSavers who don‘t make what we call an "active choice". So if you join KiwiSaver and don‘t give a hoot about who‘s handling your precious savings, you‘d just let the Government pass your money on to a default provider. They‘re the big guys: insurance companies, banks and handlers of massive superannuation schemes.

If Defaulting Isn‘t Your Style

The Government also tested and approved many other companies known as "active choice" KiwiSaver providers. There are now more than 30 approved KiwiSaver providers, so you‘ve got plenty of choice. If you need help to select a provider (and unless you‘re a complete genius you will) check out our comparison tools.

Employer Choice

Just to make things a bit more interesting, your employer can sign an agreement with any KiwiSaver provider, assigning that provider default status for employees. All this means is that if you don‘t make an active choice about your provider, you will be defaulted to your employer‘s provider of choice and not randomly to a government default.

Need to Know

• You can apply to join any KiwiSaver provider you like.
• You can change providers whenever you like.
• You do not have to join your employer chosen KiwiSaver provider (although there‘s nothing stopping your employer from providing incentives so you‘d be "mad not to".)
• It‘s not automatic that a KiwiSaver provider will accept you as a member. They may have age restrictions, income thresholds, or they may specialise in KiwiSaver for people working in specific industries.
• Not all providers are made equal. Performance and responsibility aside, providers can have significant differences:

• They all offer different types of investment portfolios ranging from aggressive to comatose.
• They have different fees and charge different amounts for different services.
• Some will have minimum requirements for voluntary contributions, others will not.
• While they are all subject to the KiwiSaver Act, they will have different terms and conditions for members.

Before you go and hide under the bed

Choosing the right provider shouldn‘t be a nightmare. Our charts and comparators will help you with your research.

Of course we hope you‘ll choose GMK as your provider, but if you do decide another provider suits you better, good on you for doing your homework and making an informed choice. It‘s far better to take an active interest in your retirement savings than not to give a toss.

Back to top

 
2%, 4%, 8%. WHAT YOU REALLY HAVE TO CONTRIBUTE

A lot of our employee members want to know why they can‘t just contribute $1043 per year and get the government matching contributions. They‘re annoyed that a self-employed or unemployed member has that flexibility while employees are expected to commit to 2%, 4% or 8% of their gross income.

Before we tell you about the loophole, here are some things to think about before you pursue "the most benefit for the least input" strategy.

• KiwiSaver is a retirement SAVINGS scheme. You know what saving means.
• Employees who contribute at least 2% will get a 2% contribution from their employer (Some employers are exempt if they contribute to a complying super scheme.)
• If you‘re not contributing to KiwiSaver through your job your employer is not obliged to make contributions either.
• Saving from source is far easier than finding money left over at the end of the pay period. While some people might struggle with 2% less in their pay, there are all sorts of ways to make it work. Check out the section on budget and income on Sorted.co.nz.

Lecture over

There‘s a thing called a "contributions holiday".

• Employees who want to take a contributions holiday apply to IRD.
• These holidays can last from three months to five years and they can be taken consecutively.
• While you‘re on a contributions holiday KiwiSaver deductions from your pay are stopped. (And employer contributions can stop too.)
• Being on a contributions holiday does not prevent you from making voluntary payments into your KiwiSaver account.

You get the picture.

Back to top

KIWISAVER ADD-ONS

Mortgage Diversion

There was a provision in KiwiSaver for some contributions to be diverted to mortgage payments. This has been abolished.

First Home Purchase Withdrawal

You can withdraw from your KiwiSaver account to help finance the purchase of your first home if you fit the following description:

• You must have contributed to KiwiSaver for three years.
• The house must be your principal place of residence.
• You must not have owned a house before.
• You can withdraw your contributions and your employer‘s contributions.
• You cannot withdraw government contributions.
• You should contact your scheme provider to arrange a first home withdrawal.

First Home Purchase Subsidy

Some KiwiSavers will be able to take advantage of a first home subsidy of up to $5000. This initiative is administered by Housing NZ. It‘s means tested and has other restrictions. The details are available on IRD‘s website.

 Back to top

 Want us to cover another KiwiSaver topic in depth? Email us with your suggestion.