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.