trendz - our client newsletter

june 2007

budget brings changes to KiwiSaver

In the 2007 Budget the government introduced changes to the KiwiSaver Scheme which commences on 1 July 2007.

The most significant change announced is a move to require compulsory employer contributions from 1 April 2008. When the scheme was first announced any employer contributions to the KiwiSaver account of an employee would be voluntary. But now, beginning on 1 April 2008, if a new employee opts to stay in KiwSaver, or an existing employee elects to join the scheme, a compulsory employer matching contribution will be phased in over four years. Initially the employer contribution will start at one per cent for the April 2008/09 year. This will increase by one percent each year until it matchs the minimum employee contribution. The employer contribution will therefore be four per cent from 1 April 2011.

To partly recognise the cost of compulsory employer contributions a tax credit capped at $20 per week per worker (about $1,040 per worker per year) will apply to employers. This tax credit will be paid to employers through the PAYE system by offsetting against the employer's contribution and other PAYE liabilities.

Employer contributions to all non-KiwiSaver schemes will count towards compulsory contributions for:

• employers who provide access to a superannuation scheme as of 17 May 2007
• existing scheme members (i.e. members prior to 1 April 2008), or where the employment agreement of existing employees (i.e. employees prior to 1 April 2008) provides access to the scheme
• existing employment (i.e. employment as at 1 April 2008).

For prospective KiwiSaver members the budget contained news that they will benefit from a tax credit matching contributions at 100 per cent, up to $20 per week (about $1,040 per year) from 1 July 2007. An annual fee subsidy will also apply, which has been set at $40 per member, per annum.

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Disclaimer: This article is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication. Please refer to our Legal Notices.

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