KiwiSaver for self employed

Q I own and run a business in partnership with a family member and employ staff. Along with the rest of my staff I get paid a weekly wage, which has PAYE deducted. I recently took on a new payroll person and she suggested I join KiwiSaver. We filled out the forms and I started making contributions. Shortly afterwards I got a phone call from Inland Revenue. They said I could not join KiwiSaver, I could only "go private". They said it was because I was in partnership, rather than running my business through a company. They have refunded my contributions to me. Why can't I join KiwiSaver?

A. If you meet the criteria, you can certainly join KiwiSaver. Anyone under the age of 65 who is entitled to live and work permanently in New Zealand can join KiwiSaver.

Those who aren't working (including children) need to enrol directly with a provider of their choice. People who are working can either enrol through their payroll person (by filling out a KS2 form) or they too can contact a provider directly, who will let their employer know that they have signed up and what level of contributions they have chosen (currently 2, 4 or 8 per cent).

Many people like you who own their own business choose to get paid a regular salary with PAYE deducted, to avoid large tax bills. Others may take regular drawings and pay provisional and terminal tax. I would expect that most of those in the former category (like you) should be able to have their KiwiSaver contributions deducted from their salary, and get employer contributions as well (of course, this essentially comes out of their own pocket).

Someone who takes drawings will have to deal directly with a provider and choose how much they want to contribute. There won't be any employer contributions in their case but they can make a larger contribution to make up for this. Either way all contributions are taxed, so neither has an advantage over the other.

I suspect Inland Revenue may have misinterpreted your situation. Perhaps they thought you were trying to enrol automatically as a new employee. Rather than make any further assumptions, I approached them directly. I duly received the following response from an Inland Revenue spokesperson:

"A person in a partnership, and who is also an employee of the partnership and has PAYE deducted from their salary, can make contributions to KiwiSaver through their employer. While they do not meet the automatic enrolment rules, they can give the employer (in this case the partnership) a KS2 form to have deductions started. The form is available on the KiwiSaver website (www.kiwisaver.govt.nz). They also have the option of contacting one of the scheme providers directly to enrol."

I am sorry that you were knocked back in your first attempt to sign up for KiwiSaver. I suggest you make another attempt, following their instructions to the letter.

Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free by calling 8703838. The information in this article is of a general nature and is not intended to provide personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.