Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

KiwiSaver tax rates need fixing, world’s ‘most punitive’

KiwiSaver tax rates need fixing, world’s ‘most punitive’, says savings lobby

April 17 (BusinessDesk) – New Zealand’s tax system heavily penalises KiwiSaver while offering massive tax breaks to property investors and needs to change, says savings lobbyist the Financial Services Council.

Its executive director, Peter Neilson, issued a plea to political parties on the issue, which sees New Zealanders relying on retirement savings to save nearly twice as much per week as necessary to secure a comfortable retirement.

“At a practical level this means a person on an average income would have to save $16 a day rather than $27 (63% less) to achieve a comfortable retirement income,” said Neilson, a former Revenue Minister in the David Lange Labour government of 1984-90.

“For a typical person saving for retirement, just 10 percent of their retirement earnings comes from the initial contributions and a massive 90 percent from compound returns,” said Neilson.

Yet the way compound earnings are taxed at the moment means a person paying the top personal tax rate of 33 cents in the dollar can expect to lose more than half (54.7 percent) of their KiwiSaver retirement income, “due to the impact of taxation over 40 years.”

“New Zealand now has the world’s most punitive tax regime for retirement savings when compared with investments in rental housing,” he said. “If the same person invested in rental property their effective tax rate would be only 7.9 percent” if the property was based on a 20 percent deposit.

“If that period of ownership dropped down to only 10 years the rental investor would receive a tax credit, a payment from the IRD – effectively a subsidy for investing in rental property. We can’t all be rental property investors,” Neilson said.

The FSC proposes cutting the current KiwiSaver fund tax percentage rates of 28, 17.5 and 10.5 to 15, 8 and 4.3 respectively.

Paying for this would require sacrificing the $630 million annual cost of the $521 that KiwiSaver members can claim against their tax each year, but the $1000 tax-free KiwiSaver join-up incentive could be kept, said Neilson.

“Regardless of whether KiwiSaver is universal (compulsory) or voluntary, the over-taxation of KiwiSaver funds has to be addressed,” Mr Neilson says. “Leaders of all parties should say if they support or oppose introducing fair taxes on savings. Fairer taxes will have a huge impact on the future incomes of New Zealanders when they retire.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Superu Report: Land Regulation Drives Auckland House Prices

Land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland according to a new research report quantifying the impact of land use regulations, Finance Minister Steven Joyce says. More>>

ALSO:

Fletcher Whittled: Fletcher Dumps Adamson In Face Of Dissatisfaction

Fletcher Building has taken the unusual step of dumping its chief executive, Mark Adamson, as the company slashed its full-year earnings guidance and flagged an impairment against Australian assets. More>>

ALSO:

No More Dog Docking: New Animal Welfare Regulations Progressed

“These 46 regulations include stock transport, farm husbandry, companion and working animals, pigs, layer hens and the way animals are accounted for in research, testing and teaching.” More>>

ALSO:

Employment: Most Kiwifruit Contractors Breaking Law

A Labour Inspectorate operation targeting the kiwifruit industry in Bay of Plenty has found the majority of labour hire contractors are breaching their obligations as employers. More>>

ALSO:

'Work Experience': Welfare Group Opposes The Warehouse Workfare

“This programme is about exploiting unemployed youth, not teaching them skills. The government are subsidising the Warehouse in the name of reducing benefit dependency,” says Vanessa Cole, spokesperson for Auckland Action Against Poverty. More>>

ALSO:

Internet Taxes: Labour To Target $600M In Unpaid Taxes From Multinationals

The Labour Party would target multinationals operating in New Zealand to ensure they don't avoid paying tax if it wins power and is targeting $600 million over three years through a "diverted profits tax," says leader Andrew Little. More>>

ALSO: