David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: How to save tax - a debate of two halves

Add a comment
Photo / Thinkstock
Photo / Thinkstock

According to fund research house, Morningstar, the tax environment for New Zealand managed funds - including KiwiSaver - is relatively benign.

In its 2013 'Global Fund Investor Experience Report' , Morningstar says:

"New Zealand's tax structure is complex on the surface, but fund companies assess taxes on distributions prior to disbursing them to the investor. In the end, the total tax burden for New Zealand fund investors is low; the absence of most capital gains reduces investors' tax burdens."

How does that square with the big-end-of-town funds management and insurer lobby group, the Financial Services Council (FSC), attempt to spark a populist rising over KiwiSaver tax rates?

Well, it doesn't really. And as the argument between legal firm Chapman Tripp and the FSC demonstrates, this is not a black-and-white issue.

It all depends on what assumptions you want to plug into a model.

As I argued previously the Portfolio Investment Entity (PIE) tax structure has some pretty good benefits for long-term savers - particularly the capital gains tax exemption for Australasian shares.

Based on the Financial Markets Authority (FMA) 2013 KiwiSaver report, the aggregate KiwiSaver PIE tax collected over that financial year equated to about 8.8 per cent of total investment returns.

In the booklet explaining its position, the FSC refers to "independent polling" showing 79 per cent of New Zealanders "want lower taxes on their savings".

But that's the easy question: the only surprising thing about this result is that 21 per cent didn't know, didn't care or actively opposed (just two per cent) lower taxes.

When it asked whether 'lowering taxes on savings would be better for savers and New Zealand longer term', the FSC survey was more equivocal: just over 51 per cent backed this proposition.

As the FSC points out this constitutes a "majority", albeit a slim one (that could be downgraded to a slim minority under the survey's +/- 2.1 per cent margin of error).

Let's call it 50/50.

- NZ Herald

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

Read more by David Chaplin

Have your say

We aim to have healthy debate. But we won't publish comments that abuse others. View commenting guidelines.

1200 characters left

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_n4 at 18 Sep 2014 16:48:36 Processing Time: 524ms