KEY POINTS:
FOR SAVERS
• From July 1 all member contributions to KiwiSaver (and complying superannuation funds) will be matched by a tax credit of up to $20 per week (totally $1040 per year) that wilil be paid directly into their KiwiSaver account.
• From April 1 2008, all employees contributing to KiwiSaver will also be entitled to a matching employer contribution rising from 1 per cent of gross salary to 4 per cent phased in over the four years until April 1 2011. The minimum employee contribution will remain at 4 per cent of gross salary.
• From April 1 2008, employer contributions will not be able to count towards the minimum 4 per cent contribution for new KiwiSaver members. Transitional rules will be put in place for employees who join prior to April 1 2008 and contribute less than the minimum 4 per cent.
• Cullen and Dunne said: "The changes we are announcing today will mean more New Zealanders can grow assets beyond the family home which is critical to gorwing an adequate retirement income to meet their aspirations. If we are to build a stronger economy and a fairer society we must do more to improve saving habits."
FOR EMPLOYERS
• All employers contributing to an employee's KiwiSaver scheme (or complying superannuation fund) will be eligible for a matching employer tax credit of up to $20 per week ($1040 per year) per employee from April 1, 2008.
• Employer tax credits will be paid to employers through the PAYE system by offsetting the credit against the employer's contribution and other PAYE liabilities to minimise cashflow impacts and compliance costs.
• From July 1 2007, employer contributions to KiwiSaver schemes will need to be made through Inland Revenue.
• From April 1 2008, all employees contributing to KiwiSaver will also be entitled to a matching employer contribution rising from 1 per cent of gross salary to 4 per cent phased in over the four years until April 1 2011. The minimum employee contribution will remain at 4 per cent of gross salary.
• Treasury said: "In general, the employer tax credit will cover the cost to employers of the 1 per cent compulsory contribution in the first year, while allowing employers time to planm for, and negotiate with employees, the increase in employer contributions in subsequent years."
• Cullen and Dunne said: "The employer tax credit makes it much easier for employers to provide matching contributions. In the first year it will meet the full cost of the contributions for 95 per cent of the workforce. Overall, the net additional costs to employers by 2011/12 should overall be no more than one per cent of the national wage and salary bill at that point."
FOR SUPERANNUATION SCHEME PROVIDERS
• Members making contributions to a complying fund section within a registered superannuation scheme will be eligible for all the KiwiSaver benefits other than the $1000 KiwiSaver kickstart and fee subsidy.
• Employers making contributions to complying superannuation funds will be eligible for the employer tax credits and the employer contributions will be exempt from Specified Superannuation Contribution Withholding Tax (SSCWT), subject to a cap - the lesser of the employee's total contribution or 4 per cent of the employee's salary or wages.
• In some circumstances, employer matching contributions to non-complying funds will count towards the compulsory employer matching contributions, however, employers will not be eligible for the employer tax credit on these contributions.
• From April 1 2008, KiwiSaver providers will be required to disclose their approach to responsible investment. A joint working party will be established to recommend options for giving effect to this decision.
• From April 1 2008, providers will be required to notify the Government Actuary when compulsory matching employer contributions to complying superannuation funds have not been paid in full.
• Given the increased incentives to join KiwiSaver, the Ministry of Economic Development will be investigating whether current KiwiSaver regulatory arrangements are still appropriate. Any proposed changes will build on existing regulatory arrangements. They will also aim for greater consistency between the regulation of complying funds and KiwiSaver schemes while ensuring, insofar as possible, that complying superannuation funds remain a viable and attractive option for existing schemes.
