KiwiSaver for the self employed - are there any advantages?

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Forums › Finance and wealth management › KiwiSaver for the self employed - are there any advantages?

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timmmay

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#501682 3-Aug-2011 22:55

Thanks I'll read when I get to a pc, on iPod now :)

Regs

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#501687 3-Aug-2011 23:12

mattwnz: You can also take out some of it after 3 years to buy your first house.

you "might" be able to take some out to buy your first house. there are a bunch of rules around that - restrictions on the cost/type of house you can use it for, restrictions on how much you can earn and still take advantage....

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richms

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#501692 3-Aug-2011 23:33

I was told that there was no way that any half successful person in Auckland could ever use the first house thing on anything worth owning. Waste of time even considering it as a reason to use kiwisaver for that length of time.

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bazzer

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#501697 3-Aug-2011 23:53

timmmay: Yeah, that $260 was for the 2010 tax year, which isn't what was suggested above - matching my contribution. It's basically refunding the income tax I paid on that money.

So kiwisaver contributions are tax free, but they don't match your contributions - that's what employers do, not the government.

You came here looking for info, and when people gave it to you, you refused to listen and just contradicted them with your incorrect info. The fact is that even for self employed people, the government matches dollar for dollar up to $1042 for the years ending 30/06/2010 and 30/06/2011 (and 50c per dollar up to $521 for the year ending 30/06/2012). You said you joined just before 30/06/2010, so my guess is that you only contributed $260 up to 30/06? Either that or some adjustment based on the fact that you weren't in the scheme for the full year.

Ignore the "tax" part, as I said previously the member tax credit has nothing to do with tax. The tax credits are the government contributions!

How much did you contribute between 01/07/2010 and 30/06/2011? You should receive the same amount (up to the stated maximum) as the "member tax credit" sometime soon or even already. My provider claimed my credit on the 15/07. Sounds like you need to get a new provider, and probbly a new accountant while you're at it!

Geese

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#501724 4-Aug-2011 07:37

bazzer: Sounds like you need to get a new provider, and probbly a new accountant while you're at it!

You might have the same incompetent tax accountant I had?

The one who NEVER made contact by any medium when requested, but promptly sent the bills?

The one who said self employed people "don't have to pay ACC", "I can make it go away"... only for me to get lumbered with 4 years of ACC payments all to arrive at once as lump sum with 30 days until due.

Yes there are some really great tax accountants out there.

timmmay

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#501738 4-Aug-2011 08:35

bazzer:
timmmay: Yeah, that $260 was for the 2010 tax year, which isn't what was suggested above - matching my contribution. It's basically refunding the income tax I paid on that money.

So kiwisaver contributions are tax free, but they don't match your contributions - that's what employers do, not the government.

You came here looking for info, and when people gave it to you, you refused to listen and just contradicted them with your incorrect info. The fact is that even for self employed people, the government matches dollar for dollar up to $1042 for the years ending 30/06/2010 and 30/06/2011 (and 50c per dollar up to $521 for the year ending 30/06/2012). You said you joined just before 30/06/2010, so my guess is that you only contributed $260 up to 30/06? Either that or some adjustment based on the fact that you weren't in the scheme for the full year.

Ignore the "tax" part, as I said previously the member tax credit has nothing to do with tax. The tax credits are the government contributions!

How much did you contribute between 01/07/2010 and 30/06/2011? You should receive the same amount (up to the stated maximum) as the "member tax credit" sometime soon or even already. My provider claimed my credit on the 15/07. Sounds like you need to get a new provider, and probbly a new accountant while you're at it!

While I appreciate the information and advice people have given me, I don't accept information from anonymous people on the internet as fact without references. This is especially true in an area where there's contradictory information available. I also suspect people having their employer match their contributions confuses facts further.

I joined kiwisaver some time in the 2009-2010 kiwisaver year, I don't remember exactly when and i'm not near my records, but it was well before the June 30 cutoff. Later that year I received a $260 tax credit from the government, which is approximately how much income tax I would've paid on my $1000 contribution, and the line description says, "government tax credit". There's no line that says "government contribution". Because this information comes from my own financial records, from a major kiwisaver provider, I trust this information more than I trust the information from anonymous internet sources. It's possible that it is a contribution, and I was only a member for a fraction of that tax year, but I doubt it.

While i'm happy to be proven wrong, I think you're incorrect about the matching government contribution. Here's some text from the link given above

While the self-employed and non-employees miss out on employer contributions, you still get tax credits from the government, which match your contributions dollar for dollar up to $20 a week, or $1043 a year.

That doesn't say the government matches your contributions, it says you get matching tax credits.

It seems that staying in kiwisaver, the benefit is the tax credit, which from next year will be $130/year. Given I can easily spend that on a nice dinner out it's not really enough to make me lock my savings into a kiwisaver scheme.

TechSol

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#501745 4-Aug-2011 08:43

Regs:
mattwnz: You can also take out some of it after 3 years to buy your first house.

you "might" be able to take some out to buy your first house. there are a bunch of rules around that - restrictions on the cost/type of house you can use it for, restrictions on how much you can earn and still take advantage....

Actually there are no restrictions other than it has to be your first house and you can only withdraw your contribution and your employer's contribution (ie. not the govt contributions)

You are possibly getting confused with the $5000 first home subsidy which is income tested.

(Yes, I have just bought a place using kiwisaver funds as a deposit )

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timmmay

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#501774 4-Aug-2011 09:49

Right, I just heard back from my KiwiSaver provider, and it appears i'm wrong. Yes, it I know, i'm surprised too, but it does happen occasionally!@ ;-) I now believe the government does match your contribution dollar for dollar, but that switches to a maximum of about $520 per year this year.

I based my conclusion on the assumption I contributed the maximum amount in my first year. I've discovered because I joined late in the year I only contributed $260. That's what threw me off.

So yes, it appears KiwiSaver is worthwhile for self employed people.

bazzer

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#502246 5-Aug-2011 08:34

timmmay: Right, I just heard back from my KiwiSaver provider, and it appears i'm wrong. Yes, it I know, i'm surprised too, but it does happen occasionally!@ ;-) I now believe the government does match your contribution dollar for dollar, but that switches to a maximum of about $520 per year this year.

I based my conclusion on the assumption I contributed the maximum amount in my first year. I've discovered because I joined late in the year I only contributed $260. That's what threw me off.

So yes, it appears KiwiSaver is worthwhile for self employed people.

Which is exactly what I told you.
QED.

Seriously though, I don't know which part of "While the self-employed and non-employees miss out on employer contributions, you still get tax credits from the government, which match your contributions dollar for dollar up to $20 a week, or $1043 a year." you didn't understand. You get "tax credits" (which I already told you was a misnomer and a couple of links to the kiwisaver website were provided) from the "government" which "match your contributions dollar for dollar up to $20 a week". I don't know how you reach the conclusion that "doesn't say the government matches your contributions". It doesn't? Doesn't it say exactly that?

Anyway, all sorted now. Just note that they don't match dollar for dollar for this year (from 01/07/2011 to 30/06/2012) it's only matched 50c to the dollar, so you still have to put in $20 per week (which is ALL you should put in as a SE Kiwisaver, in my opinion) to get the $10 week government contribution. If you don't believe me, too bad!

timmmay

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#502277 5-Aug-2011 09:12

"I told you so" would've been enough there bazzar ;) I do find the websites poorly written and confusing, and i'm not particularly stupid.

bazzer

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#502287 5-Aug-2011 09:24

timmmay: "I told you so" would've been enough there bazzar ;) I do find the websites poorly written and confusing, and i'm not particularly stupid.

It's a shame your accountant is not more onto it, because then they could've advised you to make sure you contributed $1042 in your first year to take full advantage of the government contribution if you wanted to (although as I said, it might depend on when you joined as well as your contributions).

The website is meant to be simple for everyone to understand, but then they do silly things like calling the government contributions tax credits. You can pay no tax and still get the member tax credits on your kiwisaver account.

Anyway, there's no real shame in you not being able to decipher the website but it's part of your accountant's job! I say name and shame the accountant that doesn't even understand kiwisaver!

timmmay

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#502289 5-Aug-2011 09:29

The first year's "tax credit" is pro rata based on when you joined. Since I joined about three months before the end of that kiwisaver year that was the maximum I could contribute and still get a matching tax credit.

I would prefer not to name my accountant. In general both she and the firm are excellent, and i'm not sure if she's even meant to be giving advice about kiwisaver. I pointed out her error to her, and I may let her manager know, purely so she can receive training, not as a penalty at all.

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