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United Future wins battle on super tax rates


United Future wins battle on super tax rates

United Future revenue spokesman Gordon Copeland today welcomed Finance Minister Michael Cullen's turnaround on super tax rates.

This year's tax bill, due to move to the committee stage in Parliament next week, reduces the withholding tax amount on employers' contributions to super funds from 33% to 21% for employees earning under $38,000, and 15% for employees earning under $9500.

However where the amounts of the employers' contribution, when added to salary or wages take the total over the $9500 or $38,000 threshold, then all of the employer's contribution would have continued to be taxed at the higher rate, i.e. 21% and 33% respectively.

"This would have lead to over-taxation - a fact acknowledged by Dr Cullen," Mr Copeland said.

"Following my initial discussions with him, Dr Cullen agreed to move to a truly progressive option which would have seen the portion under the threshold taxed at 21% and the portion over the threshold at 33%, technically the correct position.

"However this in turn would have involved extra compliance costs and employers had significant concerns in that regard.

"Accordingly I am pleased to say that Dr Cullen has, in line with my original suggestion, now agreed that the tax rate applied to the whole of the employer's contribution will be based on the salary or wages paid to the employee in the previous income year.

"If those salary or wages total less that $38,000 then the 21% tax rate will now apply to the whole of the employer's contribution, including that portion which is above the $38,000 level.

"I am delighted with this outcome. The position is now straightforward, and for the huge number of New Zealanders whose income is close to the $38,000 threshold, if anything, under-taxation rather than over-taxation will result.

"This in turn will give further encouragement to the establishment of employer-based superannuation schemes and encourage long term savings - something which as a nation we desperately need."

© Scoop Media

 
 
 
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