Just a short note at a time when many are in the throes of their 2012 tax return. If you are having any problems or concerns, phone IRD. I did recently and got a prompt reply and excellent service.
He gave an extremely detailed explanation of tax related to PIEs, and how to manage the tax, gave me an over-the-phone extension to November to file a return and was very helpful with several other aspects of my tax affairs, looking up my last return and making suggestions as to how to minimise my tax.
The call centre is apparently in Christchurch.
I enjoy your column every week, although it seems to cover KiwiSaver a bit much.
The recent discussion on varsity fees has been interesting.
Do you want to be teacher's - or rather Inland Revenue's - pet, or something? No, that can't be right. They don't know who you are. We'll just have to accept that you are a man pleased with the service you received, and kind enough to pass on the good news.
As you say, the tax season is upon us - although, thank goodness, it's not nearly as intensive as in many other countries because most New Zealand salary and wage earners don't need to do anything at the end of the tax year.
Still, it's worth checking to see if there might be a refund for you - or other possibilities.
Says Inland Revenue: "We would ask people to check out www.ird.govt.nz/tax2012 to see what they may need to do; for example, claim a tax refund, check if they need to file an IR3, claim donations, etc. Those who do need to file an IR3 need to have their return in by July 7, unless they have a tax agent or have been given an extension of time."
Who is likely to get a refund? "Someone may be eligible for a refund if their income has changed during the year, they only worked part of the year or they earned less than $9800," says an official.
"People can use Inland Revenue's free online calculator to work out if they're due a refund. They need their end of year payslip and details of any other income received during the year. All the information that is entered is anonymous. If the calculator shows they're due a refund then they can take the next step by requesting a personal tax summary."
While the department assures me it can cope with lots of phone calls at this time of year, they encourage people to look online for other info, too. "If they're registered for our secure online services, they can update contact details, check if they're due a refund, ask for a personal tax summary, confirm their summary, and file their IR3 online."
If you prefer to talk to a real person, ring 0800 227 774 between 8am and 8pm Monday to Friday and 9am to 1pm on Saturdays.
How easy is it to get an extension of your deadline over the phone? "If someone is unable to file by the July 7 date for any reason, they need to phone us before that date on 0800 377 774, using the keyword 'extension of time'. Acceptable reasons include circumstances beyond someone's control, such as illness or accident, and being unable to obtain the information needed to complete the return."
I also asked if Inland Revenue routinely suggests how people can minimise tax. The reply: "We will advise people to be aware of whether they can claim a tax credit. For example, if they have made donations or childcare and housekeeper payments, then they could be entitled to a tax credit."
See, they're nice people after all. Usually.
Fund forging ahead
I started reading your column back in 2008, and it kicked me into signing up to KiwiSaver. I'd already been in the post-uni workforce for a couple of years, and had left retirement saving to some vague notion of something to look at in my 30s.
Now that I'm 30, my KiwiSaver fund is pushing $20,000 and I'm paying in at 8 per cent. That is $20,000 in retirement savings ahead of where I likely would have been otherwise. So, thanks!
It's a pleasure. And thanks for writing - and giving me a response to the previous correspondent's final comment.
Researchers point out that not all money in KiwiSaver is savings that would not have happened otherwise. To a considerable extent, people have just moved money they would have saved elsewhere. But there are also plenty like you.
There hasn't actually been all that much on KiwiSaver in this column this year (she says defensively). The tally shows that more than two-thirds of the Q&As have had nothing to do with the scheme, and another 5 per cent have mentioned it only in passing. Given that probably half the readers' letters to me are about KiwiSaver, I could be accused of neglecting the subject. But not this week, and nor for next little while, when we look at questions about the tax credit that need to be answered before the June 30 cutoff.
Also, a flood of people who joined KiwiSaver at the start, aged 60 or older, will gain access to their money for the first time on their fifth anniversary of joining in the next few months. Many are seeking information on the transition, and others have asked for suggestions on what to do next, so there are several Q&As coming up about that.
However, the advice there isn't really any different from what to do with other retirement savings, so hopefully it will be helpful to many non-KiwiSavers too. And, for the likes of our previous reader, I always try to have at least one non-KiwiSaver Q&A.
No credits overseas
I have two daughters working overseas and both have KiwiSaver accounts from previous employment in New Zealand.
Can I deposit money into their KiwiSaver accounts and receive the member tax credit of 50 per cent of the $1043 I would deposit into each of their accounts? How does IRD check up on if a person is working overseas or is still resident in New Zealand but is not working?
You - or anyone else - can deposit money into your daughters' accounts, but they are not eligible for tax credits if they are not living in New Zealand.
How does Inland Revenue know? Here's what an official said: "The scheme provider is responsible for determining eligibility for the member tax credit. When a member's circumstances change that may affect their entitlement to the member tax credit, they must advise the scheme provider."
What if they don't?
"When the member withdraws, they sign a declaration and part of this is a residency question," says the official. "The issue of entitlements at the time of withdrawal is between the member and their provider. All of the funds are sitting with the provider and the declaration is something that they receive.
"The provider will then calculate adjustments for any amount that is overpaid, and if necessary, return outstanding government contributions. Inland Revenue receives a closure message to advise that a member has closed their account and withdrawn their funds."
What would happen if the person lied in their declaration about whether they were living in New Zealand over the years? Presumably nothing if they are never found out. But who knows what info might leak through?
"In any case where someone has incorrectly received a payment it would be requested back, but there are further options to recover any amount that remains unpaid," says the IRD. "Where Inland Revenue is aware a person has acted fraudulently, it will take action."
It's not something I would want hanging over me in retirement.
Money keeps coming
I have been in KiwiSaver for three years, so have to stay in for another two years. I turn 65 in May this year. I am still working. I have a couple of questions regarding my situation:
Does the company I work for still have to contribute to my KiwiSaver once I turn 65 and continue to work but collect national superannuation?
Do I still get the government tax credit if I am receiving superannuation?
Everyone in KiwiSaver gets at least five years of tax credits and compulsory employer contributions, even if they join a day before their 65th birthday.
So yes, your employer must keep contributing, and the government must keep paying you tax credits, until five years after you joined. The fact that you will receive NZ Super has nothing to do with it.
Full tax credit
My five years of belonging to KiwiSaver occurs in September this year. However, I turned 65 in July 2011 and I thought the government's contributions ceased at age 65.
I contacted my provider (Aon) and was told that the government's contributions would not end until the five years were up.
I'm a tad suspicious of this advice so would like you to confirm Aon's suggestion that I should still contribute $1043 before the end of June to get the full year's tax rebate of $521.
My suspicion was that I could only get a rebate of two weeks worth of tax credit - from July 1, 2011 until my 65th birthday on July 13, 2011. Who is right?
Rather than being suspicious of your provider, you should be grateful. Aon is right - as stated in the above Q&A. If you follow their suggestion you will get $500-odd more from the government.
The situation changes, though, in the next KiwiSaver July-June year, which includes your fifth anniversary in the scheme.
In the next week or two I will go into what happens for people in that situation.
Help for Christchurch
In reply to last week's reader comments regarding supporting Christchurch families, they will be pleased to know that Habitat for Humanity is doing precisely that.
We are repairing many damaged houses for vulnerable families in Christchurch's eastern suburbs, this being achieved through the amazing spirit of generosity of our volunteers, donors and sponsors, from Christchurch, across New Zealand and even from overseas.
We could use more volunteers in Christchurch if anyone can help us to help more families. Further information on this project is on our website: www.habitat.org.nz
Well, there we go. No need to agonise over charity at home versus charity abroad. Habitat for Humanity - and no doubt other charities - does both. Last week's correspondent might want to sign up for the Christchurch work.
Mary Holm is a freelance journalist, part-time university lecturer, member of the Financial Markets Authority board, director of the Banking Ombudsman Scheme, seminar presenter and bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to email@example.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.