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

 

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Convention Centre: Major New SkyCity Hotel And Laneway For Auckland

Today SKYCITY Entertainment Group Limited revealed plans to build a new hotel and pedestrian laneway of bars, restaurants and boutique shopping on land it owns in the Nelson and Hobson Streets block, expanding the SKYCITY Entertainment Precinct. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news