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Young Couple KiwiSaver Scenario
Category: Case Studies, KiwiSaver
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Young Couple Scenario Mike and Sally have both joined KiwiSaver. Mike was automatically enrolled when he started his new job but he then spoke to Denis who helped him decide which KiwiSaver provider and product was best suited for him. Sally’s a stay at home Mum and wanted to make the most out of what the Government was giving away so she joined up too. What do you like about KiwiSaver Sally? I can log on to my providers website and see my balance online. It’s simple to understand and at least I can track where my money is going. What do you like about KiwiSaver Mike? Denis spoke to me about how KiwiSaver can help me buy our first home. We’ve been saving up for a home for a few years but never seem to get far. With KiwiSaver, Housing Corp could give us up to $10,000 as a couple to use as a deposit. I can also use my own KiwiSaver money for that deposit too – it makes savings easier. My KiwiSaver money comes out before I get my pay check so I don’t even notice it – it’s only $2 for every $100 I earn anyway. Discuss your KiwiSaver options with Thorners Click here to view our disclosure statement. Click here to email Thorners or Call Us on (04) 528 8088
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Australian super transfer update November 2009
Category: Investments, KiwiSaver
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Legislation allowing New Zealanders returning home from Australia to bring their retirement savings with them will be introduced to Parliament in about two weeks, Finance Minister Bill English says. Providing the necessary law changes are made in Australia, it is envisaged the new arrangements will take effect in the second half of next year. “This is an important step forward for our wider Single Economic Market programme with Australia, particularly in helping the free movement of labour between the two countries,” Mr English says. “In particular, it will allow New Zealanders and Australians to consolidate their financial affairs in the country in which they live.” Currently, Kiwis who work in Australia must contribute to an Australian complying superannuation fund. However, the savings are locked into the Australian scheme until the saver reaches retirement age. Mr English signed an agreement with Australian Treasurer Wayne Swan in July, which paved the way for the new super portability scheme. It will allow retirement savings from certain Australian superannuation funds to be transferred into New Zealand KiwSaver funds – and vice versa. New Zealanders bringing their savings home must put them into a KiwiSaver fund. Australia’s Tax Office has estimated that it holds about A$13 billion (NZ$16.6 billion) in “lost accounts” in the Australian superannuation system. “We expect that much of this money could belong to New Zealanders who have returned home and these new rules will allow these funds to be brought back to New Zealand,” Mr English says. Participation in the super portability scheme will be voluntary. The Government will include the changes in the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver and Remedial Matters) Bill, expected to be introduced to Parliament in mid November. Key facts about the Super portability changes The transfer of retirement savings between the two countries will be exempt from entry and exit taxes. Under current tax laws, transferring savings from Australia to New Zealand may be regarded as a taxable dividend. The proposed legislation will ensure this does not happen. KiwiSaver members moving from New Zealand to Australia will be able to retain any member tax credits if they transfer to an Australian scheme. KiwiSaver members will not be able to withdraw money transferred from Australia to help them buy their first home, but they can use the interest earned on those savings for this purpose. Retirement savings transferred from Australia into a New Zealand KiwiSaver scheme can be withdrawn when members reach the age of 60 as long as they have retired – as set out under Australian scheme rules. KiwiSaver savings transferred to Australian schemes can be withdrawn when members reach 65 – as per New Zealand KiwiSaver rules. Contact Thorners if you have questions or require advice on this exciting financial development – we service clients NZ wide. Click here to email Thorners or Call Us on (04) 528 8088Click here to view our disclosure statement.
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Transfering Australian Super to New Zealand – July 2009 update
Category: KiwiSaver
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Q&A ON RETIREMENT SAVINGS PORTABILITY
Why is retirement savings portability being implemented?
The New Zealand and Australian labour, financial, and goods and services markets are highly integrated by international standards. Retirement savings portability is part of the Single Economic Market (SEM) work programme, which builds on our existing relationship and aims to reduce barriers that may impede the movement of people, trade and capital across the Tasman. The introduction of retirement savings portability will support and add to the degree of integration between the two countries by allowing New Zealanders and Australians to consolidate their financial affairs in their country of residence. When will the portability arrangements take effect? The Minister of Finance and the Australian Treasurer have signed a Memorandum of Understanding that formally records the intention of both countries to allow for retirement savings portability. To implement the arrangements, legislative changes are required in both countries, which we expect to be in place around mid-2010. What kind of transfers will be allowed under the portability arrangements? - Savings that are held in a New Zealand KiwiSaver scheme may be transferred to Australia. This means savings in all other funds (including complying funds) or other retirement funds cannot be transferred. – The portability arrangements will be the only way of making a transfer of KiwiSaver funds to Australia. This means individuals will no longer be able to withdraw their savings as cash one year after permanently migrating to Australia. However, as noted above, you will be able to transfer the amount of member tax credits you have accumulated. The current KiwiSaver rules require you to return your member tax credits to the government if you withdraw your savings as cash. - KiwiSaver funds can only be transferred to Australian complying schemes regulated by the Australian Prudential Regulation Authority (APRA). This means you cannot transfer your savings to an Australian self-managed superannuation fund. For more information on which Australian schemes apply, go to http://www.apra.gov.au/Superannuation/ If I move to Australia, can I leave my savings in KiwiSaver instead of transferring them? Yes. Transferring your savings to Australia when you emigrate is optional. However any contributions you make to your KiwiSaver account while living offshore will not be eligible for member tax credits. If I transfer my savings to Australia, when will I be able to access them? You will be able to access your KiwiSaver funds at the age of entitlement to New Zealand superannuation. Currently this is at 65 years of age. Any earnings on these KiwiSaver funds as well as contributions made while in Australia will be subject to all Australian rules regarding access to funds. Which country’s rules will apply to savings transferred between the two countries? In general the rules of the host country regime will apply. However there are certain differences that will be applied to transferred savings in order to protect the integrity of the respective regimes. These differences apply only to the savings that are transferred, and not to any subsequent earnings on these transfers. The key differences are set out below: New Zealand KiwiSaver funds transferred to Australia: May not be accessed until the New Zealand age of retirement (65 years). May not be transferred into Australian self managed superannuation funds. May not be transferred to a third country. Australian funds transferred to New Zealand: May not be accessed until age 60 and the individual satisfies the Australian definition of retirement at that age. May not be used to assist with the purchase of a first home. May not be transferred to a third country. If I transfer savings from Australia, can I use those funds to put towards buying a first home? As noted above, funds transferred from Australia will not be able to be used to buy a first home. This is consistent with Australia’s policy regarding superannuation funds. In addition, any savings transferred from Australia will not count towards your eligibility for the deposit subsidy. For more information on the housing-related initiatives of KiwiSaver, go to http://www.hnzc.co.nz/hnzc/web/rent-buy-or-own/home-loans/kiwi-saver-homeownership-features.htm How will these different rules be applied to transferred savings? Any savings transferred between the countries must be separately identified within an individual’s retirement savings account. Can I transfer my savings to Australia even if I don’t emigrate there? You can only transfer funds to Australia if you permanently emigrate. Before transferring your funds, your KiwiSaver scheme provider will require proof that you are residing in Australia. Can I transfer some savings to Australia and leave some in New Zealand? No. If you choose to transfer your savings to Australia when you emigrate, you must transfer them all. This avoids the proliferation of small and inactive accounts which are costly to administer. If I transfer savings from Australia, can I withdraw these for reasons of significant financial hardship or serious illness? Yes, so long as you meet the relevant conditions of release contained in the Australian Superannuation Industry (Supervision) Regulations 1994. Do I have to transfer my savings if I move to Australia or vice versa? No, the arrangements are voluntary. Will New Zealand tax any transfers from New Zealand to Australia or vice versa? No. Will Australia tax any transfers? Australia will not specifically tax the transfer of retirement savings to or from New Zealand. However at the initial point of entry into the Australian superannuation system, transfers of New Zealand savings will be subject to Australia’s rules regarding the taxation of retirement savings contributions greater than $150,000 per annum. This is known as the non-concessional contributions cap. Australian-sourced retirement savings, and any New Zealand-sourced retirement savings re-entering Australia, will be exempted from these rules upon re-entering the Australian superannuation system. For more information on this cap go to http://www.ato.gov.au/superfunds/content.asp?doc=/content/00106372.htm&page=6&H6 Is there a difference in the rate of tax on earnings between Australia and New Zealand? Yes, Australia has a flat rate of 15% on earnings. From 1 April 2010 the New Zealand tax rate on superannuation earnings will range from 12.5% to 30%. It is also not traightforward to make a comparison between the two tax regimes because of other factors. For example Australia also taxes capital gains on equities whereas New Zealand does not tax capital gains on Australasian equities. There are also other advantages to transferring your retirement savings to your country of residence such as being able to consolidate you financial affairs and not pay multiple sets of fees. Any changes to your Australian Super schemes require specialist advice so talk to us first. We service clients NZ wide so contact us for information today. Click here to view our disclosure statement. Click here to email Thorners or Call Us on (04) 528 8088
Sun Super Industry Superannuation Fund Australia
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KiwiSaver changes 1 April 2009 – Questions and Answers
Category: KiwiSaver
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WILL THERE BE ANY FURTHER CHANGES TO KIWISAVER? The government believes that the necessary major changes have been made to ensure the scheme is sustainable and affordable, and will therefore leave the basic architecture of the scheme unchanged. However, as more information is obtained about the scheme’s performance, some of the administrative details of the scheme may be reviewed and adjustments made to make the scheme run more efficiently. The government will endeavour to ensure there is consultation with key stakeholders on any further changes. I AM ALREADY A MEMBER OF KIWISAVER CONTRIBUTING AT 4%. WILL I AUTOMATICALLY BE MOVED TO THE MINIMUM CONTRIBUTION RATE OF 2%? No, current members will continue to contribute at their current contribution rate but will have the option to change to 2% if they feel that this is in their best interest. IF I AM AUTOMATICALLY ENROLLED IN KIWISAVER AFTER 1 APRIL 2009 AND MY DEFAULT CONTRIBUTION RATE IS 2%, CAN I ELECT TO CONTRIBUTE AT A HIGHER RATE? Yes, once you are enrolled in KiwiSaver you may elect to contribute at a higher rate, either 4% or 8%. WHY HAS THE FEE SUBSIDY OF $40 A YEAR BEEN REMOVED? The fee subsidy was designed before further incentives were added in Budget 2007. The current member tax credit gives incentive to members who contribute to KiwiSaver, reducing the need for a fee subsidy. If I reduce my contribution rate to 2% will this also affect my Mortgage Diversion with Grosvenor? Yes. But with Grosvenor you don’t need to complete a form or do anything as our System automatically only divert the percentage allowed. Under the current legislation you can only divert up to 50% of YOUR contributions to the Grosvenor KiwiSaver Scheme. You can’t divert any other contributions such as lump sums, employer contributions or Member Tax Credits. So if you change your contribution rate to 2%, you will only be able to divert 1% towards a mortgage for your principal place of residence. AS AN EMPLOYER, I CURRENTLY CONTRIBUTE 1% INTO MY KIWISAVER EMPLOYEES’ ACCOUNTS. HOW DOES SETTING THE MINIMUM EMPLOYER CONTRIBUTION RATE AT 2% AFFECT ME? You will need to increase your employer contribution rate to 2% from 1 April 2009, but are not longer required to contribute more than this amount.
AS AN EMPLOYER, I HAVE ALREADY CHOSEN TO CONTRIBUTE 4% INTO MY KIWISAVER EMPLOYEES’ ACCOUNTS. HOW DOES SETTING THE MINIMUM EMPLOYER CONTRIBUTION RATE AT 2% AFFECT ME? This depends on the contractual arrangement you have with your employee about KiwiSaver employer contributions. You may wish to re-negotiate your superannuation offer with employees. How does discontinuing the employer tax credit affect me as an employer/ employee? As an employer, from 1 April 2009 you will no longer be able to claim the employer tax credit of up to $1,040 per employee from the government. This will mean you will have to absorb the cost of employer contributions in the short-term. Over time, the government expects that employer contributions will become a part of the normal wage bargaining process. As an employee, initially the employer tax credit will have no effect. However, over time, employer contributions will become part of the normal wage bargaining process. HOW DOES THE REDUCTION IN THE EMPLOYER SUPERANNUATION CONTRIBUTION TAX (ESCT) EXEMPTION CAP AFFECT ME AS AN EMPLOYER/EMPLOYEE? As an employer, you will have to administer the ESCT exemption. If you pay your employees at an employer contribution level above 2% (that is, above the amount exempt from ESCT), you will have to pay ESCT on those contributions. If you are an employee and your employer contributes above 2%, your employer will now pay tax on your employer’s contributions that are above 2%. This in effect means there will be less money going in to your KiwiSaver account. For those employees whose employers pay employer contributions at the minimum amount, there will be no change to your employer contributions. WILL MY TAKE-HOME PAY BE REDUCED AS A RESULT OF EMPLOYER CONTRIBUTIONS? The KiwiSaver Act is being amended to ensure that when an employee joins KiwiSaver, the compulsory contribution from their employer is a genuine addition to their existing gross pay. Over time, the changes will make it possible for employers to take total remuneration approaches to wage bargaining. The government will allow such arrangements to occur, if they are negotiated between employees and employers in good faith.
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Click here to email Thorners or Call Us on (04) 528 8088
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KiwiSaver changes from 1 April 2009 for contributors
Category: KiwiSaver
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The National Government has made a number of changes to KiwiSaver following the confirmation of election policies with some amendments. Most changes will come into effect from 1 April 2009. The Government’s changes to KiwiSaver legislation will reduce the minimum contribution for employees to 2% of gross salary or wages, matched by a reduced maximum compulsory 2% contribution from employers.
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KiwiSaver Member Tax Credits – what, why and how to get them
Category: KiwiSaver
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What is the member tax credit? If you’re eligible, the Government will pay into your KiwiSaver scheme an annual member tax credit matching your contributions up to $1,042.86 per year (this works out to about $20 per week).
How the member tax credit works The member tax credit year is based on 1 July to 30 June. To receive the maximum member tax credit of $1,042.86 you must have: · been a member of a KiwiSaver or complying scheme for the entire year, and · contributed at least $1,042.86. If you join part-way through a membership year then at the end of the first year (30 June) you’ll receive a member tax credit in proportion to the length of time you’ve been a member. For example, if your start date is 1 January, then by 30 June you’ll be eligible for a maximum member tax credit of $521.43 (half of the annual maximum). How to calculate your membership start date is detailed below. Important: Employer contributions or any contributions you may divert to your mortgage aren’t included when calculating how much you’ve contributed in a year for the member tax credit entitlement. If you belong to a KiwiSaver scheme and another superannuation fund which has a complying fund, the tax credit will be paid to the fund that applies first. Who can get it? To qualify for the member tax credit: · you must be 18 or over, and · your principal place of residence must be in New Zealand, except for: · a government employee who’s serving outside New Zealand · a person who’s working overseas as a volunteer, or for token payment for a charitable organisation named in the Student Loan Act regulations and if the work meets one or more of the requirements set out in the Student Loan Schemes Act 1992. Note: If you turn 18 during the year and meet the residency requirement, you’ll get member tax credit for the portion of the year that you’re 18. When do you get it? Your scheme provider will claim the tax credit on your behalf from 1 July each year – you don’t have to do anything. It will be invested in your account anytime from July onwards, depending on when your scheme provider makes the claim. If you’re an employee and we haven’t received all your contributions from your employer when your scheme provider makes the claim, the balance will be paid once we receive it. How to calculate your KiwiSaver Membership Start Date Please note that due to a successful legislative challenge this is different to previously communicated Active Choice Enrolments 1. If the member joined KiwiSaver between 1 July 2007 to 30 September 2007 and had deductions made from their salary or wages, or made a contribution into their KiwiSaver account prior to 1 November 2007, their eligibility for the member tax credit would commence from the earlier of: · the first of the month in which their KiwiSaver scheme provider received a valid application for KiwiSaver membership; or · the first of the month in which their first deduction had been made from salary; or their first contribution was received by their scheme provider or Inland Revenue. 2. If the member joined KiwiSaver between 1 July 2007 to 30 September 2007 but did not have deductions made from their salary or wages, or make a contribution into their KiwiSaver account until on or after 1 November 2007, their eligibility for the member tax credit would commence on the date their KiwiSaver scheme provider received a valid application for KiwiSaver membership. 3. If the member joined KiwiSaver on or after 1 October 2007 their eligibility for the member tax credit would commence from the earlier of: · the actual date their KiwiSaver scheme provider received a valid application for KiwiSaver membership; or · the first of the month in which their first deduction had been made from salary or wages or their first contribution was received by their scheme provider or Inland Revenue. Enrolments through an employer 1. If the member joined KiwiSaver via their Employer their eligibility for the member tax credit would commence from the first of the month in which their first deduction had been made from salary or wages. How is MTC calculated when membership is less than 1 year? · The government intends to match member’s contributions up to a maximum of 20 a week, for the weeks they are a member. · The annual MTC entitlement is $1042.86, which equates to approximately $2.86 a day (1042.86 / 365). · A member’s MTC is therefore calculated at the lesser of ($1042.86 / 365) or the member’s actual daily contribution rate, for the number of days they are a member during the member credit year. · The member credit year is 1 July to 30 June so a “part-year” calculation is only required in the first and last years of membership. Click here to view our disclosure statement
Click here to email Thorners or Call Us on (04) 528 8088
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Government Approves KiwiSaver Changes
Category: KiwiSaver
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Changes approved by the Government today are attributed to making the KiwiSaver scheme affordable for tax payers, members and employers. There have been no changes to these Kiwisaver provisions…
Changes to KiwiSaver however are…
Thorners is still of the belief that only those that do not understand Kiwisaver are those that are not members. Contact us to obtain more information and a copy of our disclosure statement. Click here to email Thorners or Call Us on (04) 528 8088
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