Some employers could miss out under Kiwisaver changes

Employers contributing to existing staff superannuation schemes could miss out on the tax break included in the Government's Kiwisaver scheme.

Finance Minister Michael Cullen yesterday announced a tax break for employer contributions to the workplace-based savings scheme, and a provision which will allow participants to use some of their savings for home mortgage payments.

The scheme is set to start in the middle of next year.

Under yesterday's changes, employers will be able to contribute up to 4 per cent of an employee's salary into a Kiwisaver super scheme free of withholding tax.

The tax break is estimated to cost about $35 million a year at first, rising to about $160 million in five years.

Employers and Manufacturers Association (Northern) employment services manager, David Lowe, today said most aspects of the changes were positive.

However employers contributing to an existing scheme could miss out.

To get the benefit they would have to change over to a Kiwisaver scheme which could be time consuming and costly.

"Those employers who are already contributing via their own superannuation scheme are being left out in the cold on this one," he said on National Radio.

Mr Lowe said one likely effect of Kiwisaver would be to make people change the savings scheme they were using.

Institute of Chartered Accountants tax director, Craig Macalister, said Kiwisaver was receiving favourable treatment over other savings schemes.

The institute believed all savings schemes should be treated the same.

"If you are going to offer an incentive you should look at offering it to all forms of savers not just preferring one class over another," he said on National Radio.

Such favouritism was a departure from principled tax policy, he said.

The Kiwisaver Bill, which enacts the scheme for a new start-up date of July 1 next year, easily passed its second reading in Parliament yesterday.

However National voted against it and the party's finance spokesman, John Key, said the changes were an admission that workers were over-taxed and could not afford to pay mortgages without robbing their savings accounts.

- NEWSTALK ZB