Helen Twose

Personal finance and KiwiSaver columnist at the NZ Herald

Helen Twose: No tax on cash paid into KiwiSaver

4 comments

Money transferred from a scheme in Australia will not be taxed, but investment earnings from it will.

Photo / Thinkstock
Photo / Thinkstock

I have around $80,000 in super savings in Australia which I plan to import into KiwiSaver once the Australian side of the transtasman portability scheme is in place.

Question One: Will I have to pay tax on this money coming into my KiwiSaver?

Question Two: In relation to tax on KiwiSaver earnings, is this deducted automatically?

Question Three: What is the tax credit and do I have to apply for the tax credit, or is this done automatically?

Apart from employer superannuation contribution tax on employer contributions, there is no tax payable on money paid by members into KiwiSaver schemes and that includes money transferred in.

The future investment income on the money transferred will be taxed.

Your KiwiSaver scheme provider calculates and pays the tax payable on your KiwiSaver taxable income (the part of your investment earnings that is taxable) on your behalf.

This usually happens on March 31 each year but can happen earlier if you make a withdrawal, switch between investment funds or transfer between KiwiSaver schemes.

I'm assuming that the "tax credit" you refer to is the member tax credit that the government pays to eligible KiwiSaver members.

If eligible, the government will contribute to your KiwiSaver scheme a maximum of $10 a week or $521.43 a year (from July 1 to June 30) tax free.

Member tax credits are based on your period of eligible membership in a KiwiSaver scheme and will be paid on a reduced basis if you are not eligible for the July 1 to June 30 year.

You need to be eligible for a full year and contribute $1042.86 a year to receive the maximum member tax credit.

Member tax credits are paid annually and your KiwiSaver scheme provider will automatically apply for them so you don't need to do anything.

You are eligible for member tax credits from age 18 until you are eligible to receive a KiwiSaver retirement benefit if you reside mainly in New Zealand.

•Blair Turnbull, ASB executive general manager of wealth and insurance.

Q: My elder son turned 18 in April this year. He is a student and will remain so for the next few years. I have registered him in the KiwiSaver scheme in 2010 with a lump sum amount but no regular contribution. If I deposit $1050 into his KiwiSaver account in June 2013, would he receive the $520 Government tax credit?

Assuming he is resident in New Zealand, yes, however it will be prorated on the basis that he is eligible for the subsidy from the time he turned 18 which will provide him with 3 months of member tax credits or about $130.

•Peter Christensen, Camelot Group chairman.

Q: I have a couple of preschoolers and am thinking about enrolling them in KiwiSaver. Apart from the $1000 kickstart from the government what are the other benefits? Do I need to keep putting money in or can I take a contributions holiday?

Well done on giving some thought to enrolling your kids in KiwiSaver.

It's a long way off but one of the key benefits for younger people enrolling (apart from the $1000 kickstart you've pointed out) is the ability to take advantage of the support available to buy their first home.

There are a couple of great benefits to make this goal a reality:

1. After three years in KiwiSaver, you can withdraw your contributions (including any voluntary contribution made by family and friends), employer contributions and any investment returns generated.

The government contributions will remain in the account allowing them to continue saving with KiwiSaver for retirement.

2. A first home subsidy from the Government of up to $5000 a person (subject to eligibility conditions - speak to your KiwiSaver provider for more details).

KiwiSaver will provide them with a savings platform from an early age so your children will benefit from learning about saving and investing, which should start them on a stronger financial path than they would otherwise take. While anyone can help family and friends make the most of KiwiSaver by putting money into their account, most KiwiSaver schemes have no minimum contribution amounts for non-working members, including children.

In other words, you can put in as much or as little as you like, when you like, with no minimum payments required.

Your children will generally need to contribute to KiwiSaver when they begin paid employment.

Also, once they have been in KiwiSaver for over a year, they are entitled to take a contributions holiday.

Joining them to KiwiSaver at a young age will mean your children will have the option of taking a contributions holiday once they begin paid employment. Enrolling your children in KiwiSaver is a great way to kickstart their investment future.

•Carmel Fisher, Fisher Funds managing director.

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 on the link below.

- NZ Herald

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