Make KiwiSaver hay while the sun shines

Q I am self-employed, running my own lawn mowing and gardening business. I have had some good jobs over the autumn so I'm thinking about joining KiwiSaver. My income is lumpy so regular monthly savings won't work for me. If I joined KiwiSaver now and contributed $1042, would I get the full Member Tax Credits in July?

A: No you won't - because the Member Tax Credits in the first year are worked out according to when you joined KiwiSaver.

The Member Tax Credits (MTC) are paid to all eligible KiwiSaver members - those New Zealand tax residents who are over 18 and under 65 (unless they joined at say 63, in which case they will get them for 5 years). While they are called Tax Credits, they have nothing to do with tax. Think of them as "Member Top Ups".

Until 30 June 2011 all eligible members received a dollar from the Government for every dollar they paid into KiwiSaver, up to $1042 per year.

The amount has been cut in half to $521, but it is still a generous boost to the savings of thousands of New Zealanders. Once someone has been a member and contributing for more than a year, the timing does not matter.

They can pay a lump sum of $1042 into their account every June and get the full MTC of $521 in July. But in the first year, timing is very important.

For someone like you who is self-employed, you will join KiwiSaver directly through a KiwiSaver provider, rather than through an employer.

Essentially all you need to do is choose a provider, fill out the form in the investment statement, and send it off.

You can get advice from a qualified adviser, but you don't have to. Your 'start date' will be the day your KiwiSaver account is opened, or the first day of the month that a contribution is received, whichever happens first. If you don't make any contributions you won't get any MTC, but you will get the $1000 "kickstart".

The MTC works out to approximately $10 per week, so if you join 10 weeks before the end of the KiwiSaver year you will get around $100 in MTC.

You do not need to claim the Member Tax Credits - this is done by your KiwiSaver provider.

Each July they send a list showing each member's entitlement to Inland Revenue - having calculated how much each has contributed themselves, who has joined the Scheme during the year or turned 18 or 65, and who is no longer a tax resident in New Zealand.

Inland Revenue processes each claim and pays a lump sum to the provider, which is then credited to each member's account according to their entitlement.

All members should check online or when they get their next statement, to make sure that they have received the amount to which they are entitled.

Shelley Hanna is an Authorised Financial Adviser FSP12241.

Her disclosure statement is available on request and free of charge by calling 8703838.

The information contained in this article is of a general nature and is not intended to provide specific or 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.