KiwiSaver-lite gets green light

Included in The Taxation (Urgent Measures and Annual Rates Bill) passed today, the KiwiSaver amendments have reduced the minimum employee contribution from 4% to 2% and have also capped the tax-free compulsory employer contribution at 2%. Compulsory employer KiwiSaver contributions are currently at 1% but were due to rise to 4% over the next three years. National also scrapped the employer tax credit and the KiwiSaver fee subsidy in the legislation, with all changes due to take effect on April 1 next year.

The new law also allows all KiwiSaver members to claim the $1,040 annual credit if they contribute an equal amount over the year. According to a statement from the Finance Minister, Bill English, the net cost of this change would amount to only $22 million over five years after factoring in the abolition of the fee subsidy.

In the preamble to the new legislation it says cutting the fee subsidy could hurt KiwiSaver members “who have account with small balances and no contributions and inadequate returns as their account balances will erode over time.”

However, the government says: “The member tax credit is intended to act as an incentive to make additional contributions so this will not happen.”