Helen Twose: Employer's tax can cut worker's return

In some cases you may still qualify where you've owned property before if Housing New Zealand determine you are in the same financial situation as a first-home buyer. Photo / Sarah Ivey

Contributions from employer can also be included with the worker's pay and taxed under the PAYE rules.

From April 1 my employer has been paying tax on the employer's contribution for KiwiSaver from my pay.
This is effectively reducing the value I get from them.
Can they do this? When it comes to filling in a tax return should I take this into account?

The short answer is yes, they can.

Before April 1, 2012, compulsory employer contributions made to a KiwiSaver scheme were exempt from Employer Superannuation Contribution Tax (ESCT). This exemption was removed from April 1 last year and now employers are required to pay ESCT on employer contributions. This means that ESCT is deducted from employer contributions before they are credited to a member's KiwiSaver account. However, you and your employer may agree that the employer contributions you are entitled to be included with your pay and taxed under the PAYE rules.

Where this occurs, your employer is entitled to reduce your pay to account for the additional PAYE on the employer contribution component of your pay. Essentially, you get the same tax result either way. For further information, please visit the Inland Revenue website at www.ird.govt.nz.

For questions regarding completing your tax return, or for any other personal tax- related questions, we recommend talking to an independent tax adviser.
*Kate Armstrong, Westpac head of investments and insurance.

My wife and I bought a house in South Auckland in 2009.
Since we both took up jobs in other locations we decided to rent in Mt Roskill, central Auckland.
Our adult children took up residence in our house in South Auckland.
When we bought the house we did not realise we could use our KiwiSaver funds towards the first mortgage.
We would like to buy a property in central Auckland because the rent is so high here. We would like to use our Kiwisaver funds since it will be hard for us to put down a 20 per cent deposit. Is there any way around this so that we can benefit from using KiwiSaver funds towards a mortgage for a second property?

Generally, you are unable to access KiwiSaver savings for the purpose of buying a first home if you have previously owned property (subject to the circumstances referred to below).

In some cases you may still qualify where you've owned property before if Housing New Zealand determine you are in the same financial situation as a first-home buyer.

However, if you currently own a home or have a share in a property, you will not be eligible for this benefit.

In order to access Kiwisaver to purchase your first home, you must:

(a) Have been a KiwiSaver member for at least three years.

(b) Not have made a withdrawal from any KiwiSaver scheme to buy a home.

(c) Intend the property to be your principal place of residence.

(d) Never have owned property before or be considered by Housing New Zealand to be in the same financial situation as a first-home buyer.

There are some limited circumstances in which a member's interest in property can be disregarded for the purpose of meeting (d) above, including, for example, where the member holds an estate in land as a bare trustee or where the estate in land is a leasehold estate.
*Kate Armstrong, Westpac head of investments and insurance.

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 NZ Herald's panel of industry players email Helen Twose, target='_blank'>helentwose@gmail.com.