KEY POINTS:
The Government is to extend tax breaks for the Kiwisaver scheme to other retirement saving schemes.
Finance Minister Michael Cullen said today tax exemption for employer contributions would be extended to other registered superannuation schemes.
The Kiwisaver scheme exempts employer contributions from withholding tax and this, with other incentives such as start-up contribution of $1000, led some to fear for the future of existing workplace savings schemes.
Finance Minister Michael Cullen and Revenue Minister Peter Dunne made the announcement in a joint statement today.
"This is a further significant step to help New Zealanders save for their future," they said.
Employers pay specified superannuation contribution withholding tax (SSCWT) on contributions to registered superannuation schemes but contributions to Kiwisaver were exempted under a September law.
"By making employer contributions tax free, we are making it even more attractive for workers to save as their balances will grow much quicker with an employer subsidy whether they opt for Kiwisaver or stay in an existing scheme," the ministers said.
The tax exemption would be for amounts of up to 4 per cent of an employee's gross salary.
They said a person earning $50,000 a year who put 4 per cent into a scheme matched by their employer, would save an extra $660 a year.
"This is a win-win. Employers who take advantage of the opportunity to contribute to the long-term financial wellbeing of their staff are likely to see greater employee job satisfaction, as well as greater loyalty and retention."
The exemption is only for schemes that have lock-in rules similar to Kiwisaver's.
It will apply from July 1 next year.
The change would be made via a supplementary order paper added to the Taxation Bill which is before Parliament.
- NZPA
