Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: KiwiSaver membership starts after processing


In your first year you are eligible for member tax credits based on the number of days in the savings scheme.

Photo / Dean Purcell
Photo / Dean Purcell

I decided to join KiwiSaver through the ANZ bank/OnePath scheme.

I completed the application form on June 7, 2013 with my personal banker.

I stipulated that I would like to make an instant contribution of $1043 so I would qualify for the maximum government contribution.

As I have understood it I would need to contribute this before June 30 to qualify for the maximum amount.

However, the bank informs me that:

1. It could take two to six weeks to process my application so I could miss out on the timeframe.

2. That I will not receive the government contribution anyway because I have not been in the scheme for a year and it is not based on the amount contributed but on the number of days in the scheme.

I asked my banker to clarify whether I am in KiwiSaver from the date of my application or from when they finally have it all processed sometime over this two to six week period.

The bank informs me that I am in KiwiSaver but my application has not been processed yet so I don't qualify as being in KiwiSaver.

Secondly on the pro rata time versus amount question that I am wasting my time making the contribution before June 30 in order to gain the benefit because they can't bend the rules for me to make me eligible as I would have to have been in the scheme contributing for the past year.

I have asked my banker to make the contribution in the hopes that I am right and that I make it into the scheme, this has not been done so far and I wonder if that is because I am not in the scheme yet?

I am so confused, who is right?

Hoping for some clarity.

Thank you for questions and deciding to join KiwiSaver.

Your membership of our KiwiSaver scheme starts from the date your application is processed, not the date that you sign the form.

We expect to be able to receive and process these signed forms within 10 working days, provided all the details are correct.

So customers should receive a welcome pack from us two weeks after filling in the form.

The six weeks processing time is the maximum we need to allow if someone is transferring into our scheme from another provider.

To qualify for the maximum annual government contribution of $521.43 you need to put in $1042.86 and be in the scheme for 12 months.

Your banker was correct to say that for your first year in KiwiSaver you are eligible for these member tax credits on a pro rata basis - according to the number of days you have been enrolled from July 1 to June 30.

Inland Revenue is notified that you have joined our scheme on the day that we activate your account.

Inland Revenue is then able to calculate the number of days you are eligible for member tax credits in a given year.

From our records we can see that most applications signed in branches on June 7 were processed and activated on June 21.

This would mean these particular applications were eligible for nine days of member tax credits in the year ending June 30, 2013.

•David Boyle, ANZ Wealth general manager funds management.

I wonder if I'm going mad.

I've spent quite some time over the past 10 months trying to get IRD to see that there's some blatantly incorrect information on their KS3 form.

In the 'Making Contributions' section it states : "Your employer deducts contributions from your before-tax pay at your chosen rate of 3 per cent, 4 per cent or 8 per cent."

As far as I can see this couldn't be more wrong!

The deduction is certainly calculated based on your before-tax pay, but that amount then gets deducted from your after-tax pay.

I've just received an almost incoherent voicemail from a KiwiSaver chap at IRD.

He effectively said that while they can see my point that it might look a bit ambiguous, the wording is as they want it and won't be changed.

Actually I don't believe the wording is at all ambiguous, it's very unambiguously completely incorrect.

I'd be interested to know if you think I'm right or I'm going utterly crazy?

The after-tax pay amount is determined by Inland Revenue once all tax deductions have been taken from your salary or wage.

This includes KiwiSaver, student loan, child support and so forth.

All deductions from your salary and wages are calculated and deducted from your before-tax pay, including KiwiSaver

•Gross (before tax pay) $1500

•KiwiSaver (3 per cent) $1500 x 3 per cent = $45

•PAYE (pay as you earn tax) using the appropriate tax rate x $1500 = $345.88

•Net pay $1109.12

KiwiSaver is not calculated on an amount after the deduction for PAYE.

The total deduction of $45 is forwarded to your scheme provider.

The deduction for employer superannuation contribution tax (ESCT) applies to the employer contributions. The applicable tax rate is applied to the employer contributions and the net amount if forwarded to the scheme provider and the ESCT is paid to IR.

•Inland Revenue spokesman

The answer above has been amended from a previous version. It originally finished with the sentence:

The total deduction of $45 (less applicable employer superannuation contribution tax) is forwarded to your scheme provider.

Inland Revenue has since changed this answer to the final paragraph shown above.

•Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose,

- NZ Herald

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Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose is a freelance business journalist who writes regularly about KiwiSaver and entrepreneurial companies. She has written for the Business Herald since 2006, covering the telecommunications sector, but has more recently focused on personal finance and profiling successful businesses.

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