Fund withdrawal tax passed

The Government has finally passed a bill with imposes a 5% withdrawal tax on super funds for high income earners.

Friday, September 29th 2000, 6:43AM

Legislation introducing the five per cent withdrawal tax on superannuation funds has finally been passed, but in quite a different shape to that proposed in the first cut of the bill earlier this year.

The tax is designed to stop high income earners using superannuation funds as a way of avoiding the top tax rate.

Theoretically people who earn more than $60,000 annually could channel some of their income through a super fund and pay just 33c tax instead of the top tax rate of 39c.

The tax is designed more to stop avoidance than to raise revenue for the Government.

National's tax spokesperson Annabel Young reckons that because there are so many hardship clauses in the legislation no one should end up paying the tax.

"Taxpayers on over $60,000 are unlikely to ever pay it because of changes to the hardship rules on withdrawals," she says.

"In the Committee this tax changed into a tax incentive for employees earning over $60,000."

Other changes to be made to the legislation include pushing the implementation date back from July 31 to September 14, and an amendment to the Securities Act which provides an exemption from the need to refer to the new tax in advertisements, investment statements and prospectuses.

AMP welcomed the passing of the bill, saying it would rekindle New Zealanders’ interest in saving for superannuation through employer provided schemes.

“The incentives are a small step towards getting some New Zealanders off the fence and interested in super savings through their employers,” AMP manager corporate markets Linda McCulloch says.

This bill will increase the incentives for employees to save through employer schemes. Where these schemes don’t exist we may see employees start putting pressure on their employers to offer them.

“New Zealand now joins a wide range of countries, which through their tax systems, have established mechanisms for retirement saving,” McCulloch says.

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