Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: KiwiSaver deductions paid from gross wage?


Salary should be increased by the amount of employer contribution if payments are to come out of pay.

Photo / NZ Herald
Photo / NZ Herald

My partner has a contract that reads that his gross wage includes his employer's full contribution to KiwiSaver within it. It has been confirmed in practice and proven on his pay slip that both the employee and employer contributions are removed from his gross pay. Is this legal? Is it fair?

It is legal to have employee and employer contributions deducted from a person's gross pay if the parties have agreed to the arrangements in good faith.

The contract also has to "account for" the employer contributions for such an agreement to be legal.

What this has generally been taken to mean is that the person's gross pay is increased by the amount of the employer contribution (in this case gross pay when the employee agreed to the arrangement should have been two per cent higher than it would have been otherwise, assuming the employer contribution was two per cent when the employee agreed to the arrangement).

The arrangement (to deduct employer contributions from the employee's gross pay) also must have been entered into on or after December 13 2007.

Otherwise, employer contributions must be paid on top of, rather than deducted from, gross pay.

In terms of fairness, it is interesting to note that this issue has been fraught with difficulty since the inception of KiwiSaver.

Now that employer contributions are fully subject to contribution tax, some see such arrangements as being more unfair than previously from the employee's perspective because the employee is now not getting the benefit of tax-free employer contributions that they were previously. However, others see such arrangements as being fair because they mean that employees in KiwiSaver are treated similarly to employees who are not in KiwiSaver.

Employees therefore have a choice as to how they spend their remuneration and employees who belong to KiwiSaver don't get "extra" remuneration when compared to their colleagues who are not members of KiwiSaver.

They make employers remuneration costs more certain because they do not fluctuate depending on how many employees are contributing to KiwiSaver.

However, a recent case has held that for anyone on the minimum wage employer contributions to KiwiSaver must be paid on top of the minimum wage.

• Emma Harding, Chapman Tripp senior solicitor.

My son has a small business which he operates part time. He is thinking of buying a warehouse property with an apartment, so that he can expand his business and live on his premises. Would he be able to access his KiwiSaver funds to assist with the purchase of this type of property?

Provided an individual has been a member of one or more KiwiSaver schemes for at least three years, at least three years have passed since the first contribution was received, and the member has not made a withdrawal under the clause previously, KiwiSaver members may be able to withdrawal their and their employer contributions for the purpose of purchasing of a first home.

While the legislation states that the member purchasing the land or property must intend this as the principle place of residence, there is not specific mention around business premises.

In terms of the deposit subsidy, Housing New Zealand note that the property being bought must be either fee simple, stratum estate, cross lease or leasehold in order to be eligible for the subsidy.

If your son was looking to apply for the subsidy as well he should check the type of property in order to be eligible for this subsidy.

Your son should speak with his KiwiSaver provider directly to ensure the withdrawal is able to be made according to his circumstances.

• Anthony Quirk, Milford Asset Management managing director.

My partner and I are saving towards our first home. Living in Auckland, we're realistically still a year or two away from a reasonable deposit. I intend to use my KiwiSaver to top up our house deposit, but am not sure whether I am entitled to do so as my partner has previously owned property. For me to be able to use my KiwiSaver, do we need to show that we're in the position of a first home buyer (which, if using the combined $100,000 income rule, we're not), or would that only apply if he wanted to use his KiwiSaver towards our deposit?

Good news - providing you meet the eligibility criteria such as having been a KiwiSaver member for three years, you will be able to apply for a first home purchase withdrawal from KiwiSaver.

This is assessed on an individual basis, so the fact that your partner has previously owned a home is not an issue.

If your partner did want to apply for a KiwiSaver first home purchase withdrawal he would need to show that he is in the position of a first home buyer.

It is worth noting that the withdrawal must be used as part of the purchase price to the vendor on settlement and cannot be paid to the real estate agent as part of any deposit.

• Nigel Jackson, Westpac acting 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,

- 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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