KiwiSaver Changes Passed

December 11, 2008 New Zealand FinanceNew Zealand Taxation  No comments

The New Zealand government proposed lowering of contributions to KiwiSaver have been passed through law.

On the 10th of December parliamentary debate ended with the Taxation (Urgent Measures and Annual Rates) Bill passing, with 68 votes for and 52 votes against. Along with confirming in law changes to personal taxation levels and income brackets for the next three years, the Bill alters the way in which KiwiSaver contributions are made.

Under the newly passed laws KiwiSaver contributions are cut from an option of 4% or 8% to 2% of an employees weekly wages. Further changes include the employers contribution now being set at 2%, and the concept of an employers tax credit for the contribution being removed.

Further confirmed changes include the scrapping of the $40 fee subsidy to each contributors account. Originally aimed at alleviating the effect of scheme provider fees on savings, the scrapping of the concept may result in balances on low-activity accounts lowering when fees are higher than input.

A dollar-for-dollar credit has been passed for low-income earners who contribute less than the government’s $20 subsidy each week, meaning that low income earners will receive a the full $1040 subsidy entitlement regardless of pay.

KiwiSaver’s $1000 kickstart incentive, mortgage diversion and first-home withdrawal provision are still intact.