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KiwiSaver2 - Tax breaks have arrived

Now KiwiSaver is beginning to look really interesting. A limited form of tax break has been introduced, which if adopted will place KiwiSaver on a similar plane, tax wise, to Australia.

Quickly excerpted from the press release, the changes are:

  • Employer      contributions to KiwiSaver schemes will be exempt from tax (SSCWT –      specified superannuation contribution withholding tax), subject to a cap      of the lesser of the employee’s contribution or 4 per cent of their gross      salary or wages
  • A delay in the      starting date from 1 April 2007 to 1 July 2007.
  • Mortgage      diversion: part of a person’s KiwiSaver contribution can go towards paying      off the mortgage on their home. The rest of the contribution goes into      their KiwiSaver account .
  • Allowing the 4      per cent minimum contribution to be made up of both an employee’s and      their employer’s contribution.
  • Lengthening the      time allowed for opting out from 2-6 weeks to 2-8 weeks, with deductions      starting immediately
  • Improving the      criteria for current employer superannuation schemes to be exempted from      KiwiSaver's automatic enrolment provisions.

Mortgage diversion looks tricky. The best of the pick is definitely the tax kick.

KiwiSaver 2

KiwiSaver deductions will commence from the first paycheck for new employees. While there will be increased issues for employers and employees alike I think this improves the scheme considerably. It is far more likely that the money will not be missed (most people increasing income when they change job) than it would have been under the original proposals. It places greater emphasis on the employer to help the employee make a choice, and this could open up additional pathways for advice-giving in the process.

That is the other thing. I hesitate to disagree with my learned friends at Goodreturns (those that read broadly in the industry will be aware that I write a column for Asset magazine, part of the Tarawera stable of publications. But to claim in a recent article that KiwiSaver2 has 'addressed advice' is really stretching a point. They have promised to include a reference to seeking advice in the information pack, woop-de-doo. This will make no difference whatsoever.

Actually what will make a difference is the approach companies take to integrating advisers into the process. While advisers are entrepreneurs it is the product providers that have the resources to experiment - and they will be able to include advisers or not depending on whether they see a role for them. There is a role - but not all will see it.

KiwiSaver - Revised Draft Bill Here

Revised draft bill is here. Download kiwisaver_bill_21bar2.pdf

So now, the game moves on to distribution. Even if you are one of the 20 companies seeking default status don't expect the government to do all your work for you. If there are only four or five default providers there will be plenty of people wondering how to enter this market on an alternative basis. We have an answer for you. Perhaps more worrying - if the Government says 'yes' to even half the 20 seeking default status if will not be half the prize it was thought. Critical mass is key. Either way, we should talk about distribution.

C.A.C. - My new favourite Restaurant

While Ritchie McCaw was the subject of special attention from our Australian friends Fran and I made our way lazily towards C.A.C restaurant and bar. The old Colonial Ammunition Company building has been artfully refurbished by proprieters Megan and Anthony. The tapas-style menu is a great relief from the usual and allows the messy sharing, and continuous eating I would engage in constantly were I not kept in check by better people than myself. It is, simply, fantastic. If you haven't been, why would you now wait?

Link: www.cacbar.co.nz

Email Scams Alive and Well...

Dearest Russell,

Good a thing to write you. I have a proposal for you,
this however is not mandatory nor will I in any manner
compel you to honour against your will.

I am Mr. Christopher Anthony, 22years old and the only
son of my late parents Mr. and Mrs. Christopher
Gilbert. My father was a highly reputable businness
magnet-(a cocoa merchant) from
Free Town in  Siere
Lone who operated in the capital of
Ivory coast during
his days.
It is sad to say that he passed away mysteriously in
one of his business trips abroad on 12th.February
2003.Though his sudden death was linked or rather
suspected to have been masterminded by an uncle of
mine who travelled with him at that time. But God
knows the truth!
My mother died when I was just 4 years ago, and since
then my father took me so special. Before his death 
on Febuary 12 2003 he called the secretary who
accompanied him to the hospital and told him that he
has the sum of eleven million,seven hundred thousand
United State Dollars.(USD$11,700,000) left in a fixed
deposit account in one of the  banks in
Abidjan, the
capital of
Ivory Coast.
He further told him that he deposited the money in his
name,and finally issued a written instruction to his
lawyer whom he said is in possession of all the
documents to this fund to release the documents to me.

I am just 22 years old and a university undergraduate
and really don't know what to do.Now I want an account
overseas where I can transfer this funds. This is
because I have suffered a lot of set backs as a result
of incessant political crisis here in Ivory coast.The
death of my father actually brought sorrow to my life.
Sir,I am in a sincere desire of your humble assistance
in this regards.Your suggestions and ideas will be
highly regarded.
Now permit me to ask these few questions:-
1. Can you honestly help me as your son or brother? 
2. Can I completely trust you?
3. What percentage of the total amount in question   
will be good for you after the money is in your

Please,Consider this and get back to me as soon as

Thank you so much.
Best regards,

Mr.Christopher Anthony.

One-way traffic?

While regulatory changes are intended to increase harmonisation between Australian and New Zealand markets, in a recent article Jim Minto, of TOWER, explained that these markets will continue down quite different paths, for more fundamental reasons than regulation.


"Will New Zealand advisers be able to operate in Australia and compete with Australian advisers?

My answer is that for full advice certainly not. The Australian environment is complex and tax, superannuation and retirement rules are highly complex. Even in  Australia advisers often specialise.

How easy or attractive would it be then for a  New Zealand adviser to understand this overall environment to the point of adding real value? In my view, very limited.

It is more likely advisers might become involved in product or investment promotion opportunities where they look to bring more  New Zealand investment opportunities to Australian investors, but do so on a limited advice basis.

However, there are more opportunities for Australian advisers to advise in New Zealand, given the lower barriers and reduced complexity in New Zealand

So while I hesitate to use the phrase, it is likely to be one-way traffic - more Aussie companies and advisers will find it easier to operate here than ours there. However, given the attractions of staying within the Australian market, Kiwi advisers should not be too concerned.

Logjam of Regulation

News that advisers want to see the timetable on the Adviser Regulation document stretch out are hardly surprising. There is a logjam of regulation in our sector at present. The list below gives you some idea of the issues:

  • Regulation of Financial Intermediaries in NZ
  • Review of Financial Products and Providers
  • Securities Legislation Bill
  • KiwiSaver Retirement Savings Bill
  • Taxation of Investment Income
  • Business law reform Bill
  • Trans-Tasman Mutual Recognition of Securities bill
  • Anti-money laundering bill
  • Proposed tax changes for general and limited partnerships

The only problem is that there is always this kind of response to any change. On the one hand government hears arguments that you cannot tackle one issue in isolation from another. On the other hand when you tackle a big list of issues all together you get difficulties like this.

While the task-force said that the advice industry was 'not in crisis' which makes it a fair candidate for delay my betting is quite the reverse. The political risks with KiwiSaver and Tax changes are much, much, higher. Whereas Adviser Regulation is much less likely to have big operational risks, or where risks exist their impact is on a narrow constituency - rather than the wider public. So I bet adviser regulation - minor timetable issues aside - proceeds pretty much according to plan.

It's the others that will slip and change.