Parliament

Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search

 

Government to counter avoidance through super

27 March 2000

Government to counter avoidance through use of super schemes

The Government will introduce a special "fund withdrawal tax" to counter avoidance of the new 39 cent top tax rate by use of employer superannuation schemes, Revenue Minister Michael Cullen said today.

The superannuation fund withdrawal tax would be set at 5 percent of the amount withdrawn from an employer contribution scheme, unless the employee was leaving the job or withdrawing the money for reasons of hardship.

The tax would be limited to the percentage of the employer contribution withdrawn, and would not affect employer contributions made before 1 April this year.

"The measure is designed to prevent high-income earners avoiding the tax increase by arranging to have a portion of their salary substituted for employer contributions to superannuation funds which can be drawn on at any time," Dr Cullen said.

"Employer superannuation contributions, which are taxed at a flat rate of 33 percent, could be used by people earning more than $60,000 a year to plan around the new 39 cent rate. All they would have to do is negotiate an increase in their employer superannuation contributions, and then promptly withdraw those contributions.

"The Government has consulted widely with the superannuation fund industry and tax community to ensure the proposal is workable. I am confident it is, and that it will be an effective anti-avoidance measure, without adversely affecting employers, superannuation funds or people who are genuinely saving for retirement.

"We are also concerned about the long-standing problem of the 33 percent rate applying to the superannuation schemes of people who earn less than $38,000 a year and have a marginal tax rate of 15 or 21 percent. Their employer contributions are being over-taxed. For this reason we intend to investigate ways of lessening this effect," Dr Cullen said.

Legislation relating to the tax on superannuation fund withdrawals has been tabled today for first reading later this week. The bill also provides for the new three-tier system for the taxing of fringe benefits.

"All fringe benefits are now taxed at the top tax rate, whether or not the recipient is actually in the top tax bracket. This is unfair to low and middle income earners.

"The new FBT regime will remove that anomaly," Dr Cullen said.

Detailed information on the legislation can be found in the commentary on the Taxation (FBT, SSCWT & Remedial Matters) Bill. It is available on the web site of the Policy Advice Division of Inland Revenue at http://www.taxpolicy.ird.govt.nz.

ENDS

Questions and answers - fund withdrawal tax

Question: What does the fund withdrawal tax achieve?

Answer: It prevents avoidance of the new 39 percent top personal tax rate by high-income earners without adversely affecting employers, employees and superannuation schemes. Further, it applies only to withdrawals from savings not meant for retirement. The measure will not affect people who are genuinely saving for retirement.

Question: What will be the impact on employees and employers?

Answer: Very little. Employees who continue to make contributions at their current rates will not be affected. After 1 April 2000 new employees will be subject to the fund withdrawal tax on contributions but it will be administered by superannuation schemes rather than employers, although employers will need to communicate the changes to employees. If by 1 April an employer is already committed to an increase in employee superannuation contribution, the tax will not apply to withdrawals of that increase.

Question: What will be the impact on superannuation schemes?

Answer: The new rules will be more complex than the current rules relating to the tax treatment of employer superannuation contributions. However, the impact has been minimised as much as possible, and alternatives would have had more significant effect, such as limiting how much employers could contribute towards their employees' superannuation.

Question: How will the fund withdrawal tax be implemented?

Answer: To minimise the impact on superannuation schemes the fund withdrawal tax will be implemented through the income tax system by applying income tax at the rate of 15.15 percent to withdrawals covered by the tax.

ENDS

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On Bridges’ ‘Meth Crooks’ Leadership Failure

Back in June, Bridges publicly accepted that Housing NZ had got it wrong, and that the National government had acted upon bad advice.

Now, you’d think this admission would create a broad bi-partisan basis for compensation to those families who had been unfairly evicted, at considerable cost and emotional distress. Some people had lost their possessions in trying to meet the expense of the upheaval.

Not everyone felt so compassionate. More>>

 

Multimedia & Transcript: Acting PM's Press Conference

Winston Peters, Acting Prime Minister while Jacinda Ardern is in New York for the UN Leaders' Week, held a short press conference Monday after chairing this week's cabinet meeting. More>>

General Assembly: Ardern Rejects Trump Call For War On Drugs

New Zealand will not be signing the United States' document calling for global action on the war on drugs, Prime Minister Jacinda Ardern says. Ms Ardern is in New York for the United Nations General Assembly this week, along with about 140 other world leaders. More>>

ALSO:

Pay Equity: Cabinet Funds Deal For Oranga Tamariki Social Workers

The Minister said that an agreement in principle has been reached between Oranga Tamariki and the PSA on a settlement worth $114.6m over five years. More>>

ALSO:

Hunting v Pest Control: Tahr Control Needed To Protect Alpine Habitats

A cull of introduced Himalayan tahr browsing conservation land in Kā Tiritiri o Te Moana/ the Southern Alps is needed to protect special alpine plants and their habitats, Conservation Minister, Eugenie Sage said. More>>

ALSO:

Protest At Sea: Judge Discharges Greenpeace Activists

The judge today discharged Norman and Howell without conviction, saying the cumulative consequences of a conviction would be out of proportion to what was “low level” offending off the Wairarapa coast in April 2017. More>>

ALSO:

No Reshuffle: Meka Whaitiri Removed As A Minister

Meka Whaitiri will be removed as a Minister with immediate effect... The decision was made after receiving a report into an incident that occurred on 27 August in Gisborne, involving Meka Whaitiri and one of her staff. More>>

ALSO:

 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 
 

InfoPages News Channels