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

 

Crown Accounts: Government Ekes Out Six-Month Surplus Of $9M

The New Zealand government eked out a tiny surplus in the first six months of the fiscal year as growth in domestic consumption lifted the goods and services tax take, while uncertainties over the Kaikoura earthquake costs meant expenses were less than expected. More>>

ALSO:

Almost 400 Jobs: Shock At Cadbury's Dunedin Factory Closure

Workers at Cadbury in Dunedin are reeling after learning this morning that the iconic Cadbury factory is to close, with the loss of almost 400 jobs... “The company had reported it was doing well and this has come out of the blue,” says Chas. More>>

ALSO:

Transport: Boards Of Inquiry For Auckland Roading Projects

Boards of Inquiry have been appointed to decide on two significant Auckland roading projects in a move which will get a decision by the end of the year, Environment Minister Dr Nick Smith and Conservation Minister Maggie Barry announced today. More>>

ALSO:

Three Months On: Quake Reciovery In Kaikōura And Elsewhere

Three months after the magnitude 7.8 earthquake on 14 November, encouraging recovery progress is being made in affected communities. More>>

ALSO:

Jetstar, Qantas For Govt Transport: Government Still In Talks With Air NZ

The government is still negotiating with national carrier Air New Zealand in a cross-agency air travel contract that will add a number of new airlines to the list of approved flyers. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news