One in five KiwiSaver members may be worse off under the proposed capital gains tax changes even once the offsets are taken into account.
Figures released to the Herald from the Inland Revenue show 571,000 of the 2.85 million people in KiwiSaver have an income over $70,000.
People who earn over $70,000 would benefit from only one of the three proposed tax offsets — a boost to the annual member tax credit.
The annual member tax credit currently sees the Government put in 50c for every dollar contributed by the member up to a cap of $1043, meaning people can get a maximum of $521 per year at the moment.
Under the Tax Working Group's proposals this would be increased to 75c for every dollar contributed up to the cap resulting in a maximum payout of $781.50.
But it is also the most expensive of the offsets proposed and is included in only one of the four tax-neutral packages proposed by the Tax Working Group.
The group estimated increasing the member tax credit would cost the Government $2.6 billion over five years.
Numbers crunched by KiwiSaver provider Simplicity show how much of an impact the member tax credit increase could have.
A person on an income of $70,000 would be $841 worse off if they were invested in a growth fund over a lifetime of saving.
They estimated the person would be negatively impacted by losing $36,876 through a capital gains tax but would gain from a $36,034 benefit from an increased member tax credit.
The impact would be substantially worse if the member tax credit increase was not included in any tax changes.
A person earning $70,000 in a balanced fund could be $7307 better off at 65 if all the offsets were included but that could be wiped out if the $27,713 benefit from an increased member tax credit wasn't included.
Sam Stubbs, the chief executive of Simplicity, said the increased member tax credit was a "really big swing factor".
"Far more people will be worse off if it is not included," he said.
The National Party has said the proposed capital gains tax would reduce retirement savings for an average earner's KiwiSaver by $64,000 over the course of a 45-year working life, and by more for anyone making higher than the 3 per cent minimum contributions.
However, those figures didn't take into account the proposed tax offsets.
Tax Working Group chairman Sir Michael Cullen said last week that if all of the group's KiwiSaver proposals were adopted KiwiSaver members earning over $70,000 would, as a group, be better off.
"While some individual KiwiSavers might not be fully compensated by the group's measures, for the most part, KiwiSavers would most definitely be better off," Cullen said.
The data from the Inland Revenue (IRD) also shows the high number of KiwiSaver members with an income of under $48,000 who stand to benefit the most from the proposed tax changes.
About 61 per cent of members, or 1.73 million people, have an income under $48,000 although this also includes children signed up to KiwiSaver who may not contribute to KiwiSaver and are not eligible for any member tax credit.
IRD statistics for January show about 309,000 under-18-year-olds are signed up to KiwiSaver.
Under the Tax Working Group's proposals those earning under $48,000 would benefit from refunding the tax on the employer's KiwiSaver contribution and reducing the lower portfolio investment entity (PIE) rates for KiwiSaver funds (10.5 per cent and 17.5 per cent) by 5 percentage points each as well as any member tax credit rise.
Those earning between $48,000 and $70,000 could see a phased rebate of the tax on the employer contribution and also benefit from the reduction in the portfolio investment entity rates.
The Tax Working Group estimated the cost of removing the tax on the employer contribution for those earning under $48,000 would be $1.1 billion over five years.
Extending it to those earning between $48,000 and $70,000 in a phased arrangement would up the cost to $1.7b over five years. Reducing the PIE rates would cost $630 million.
A fourth offset to continue paying the member tax credit to those on parental leave regardless of how much they contributed would cost $70m over five years and is the cheapest of the proposals.
Martin Hawes, chair of Summer KiwiSaver's investment committee, said he was surprised to see such a small group of middle-income earners in KiwiSaver — those earning between $48,000 and $70,000.
"There must be a lot of Kiwis in that category who are not members."
Hawes said it illustrated the need for the Government to bring back the $1000 kick-start to encourage people to sign up to KiwiSaver.
The Government is due to announce next month what it plans to do with the recommendations from the Tax Working Group.
• Capital gains tax on New Zealand and Australian shares taxed on an accrual basis;
• Cutting the lower portfolio investment entity (PIE) rates for KiwiSaver funds (10.5 per cent and 17.5 per cent) by 5 percentage points each;
• Refunding the employer's superannuation contribution tax (ESCT) on employer contributions for a KiwiSaver member earning up to $48,000 per year, with a phase-out of the rebate for savers earning over $48,000 up to $70,000;
• Lifting the member tax credit from 50c per dollar to 75c per dollar of contribution from a maximum annual benefit of $521 to $781.50.