Tax free savings in NZ?

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Forums › Finance and wealth management › Tax free savings in NZ?

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charsleysa

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#1171700 9-Nov-2014 16:57

Jase2985: but the way the left looks at it only the rich ie right supporters can afford to save so its a policy that favors those on higher incomes

Well that's why kiwisaver tries to solve that issue, when people budget they usually use the figure that they see arrive in their account. Since its taken out before it reaches their account then they can save implicitly and have incentives to do so with things like employer contribution.

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Stefan Andres Charsley

afe66

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#1171705 9-Nov-2014 17:09

The UK tax system has what were (in 2000's) what were ISA, individual savings accounts which you could put seversl thousand pounds into each year and not be taxed on the returns

.The total amount varied and you were only allowed to put a set amount as cash term investments. But it was a lot by NZ standards. Ie 5000 pounds per year.

Towards the end of tax year the banks would bombard you advising you to check you had put aside the funds.

The other big tax difference with here is there is income tax isn't from first dollar but after 5k pounds or similar.

Why dont we have it here..... Obviously because neither Labour or National or anyone brought it in...

Money has to come from somewhere.

A.

JimmyH

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#1171746 9-Nov-2014 18:37

Geektastic:
JimmyH:
Geektastic: So, why do we think kiwis are not offered something available in many comparable countries?

I guess because:

1. The revenue loss would have to be made up by higher taxes on something else - assuming people want government services and entitlements to be maintained, and

2. The Treasury and successive governments (rightly or wrongly, on which I have no view) are of the view that tax incentives that apply only to certain favoured savings types just cause savings to be moved around from one option to another, rather than achieving all that much in terms of increased savings or better outcomes.

There is a reasonable case to be made that it is a good idea to forgo a bit of tax revenue in order to encourage retirement saving - it could be less costly than using taxes later to support retired people who did not make adequate provision.

Yes, but see point (2). I think that the advice that has been put to governments is that tax incentives on designated schemes don't actually do much to encourage retirement savings - what they do is shift savings from other avenues into the tax favoured one.

Sidestep

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#1171823 9-Nov-2014 21:05

Geektastic:There is a reasonable case to be made that it is a good idea to forgo a bit of tax revenue in order to encourage retirement saving - it could be less costly than using taxes later to support retired people who did not make adequate provision.

Unfortunately those who haven't made adequate provision for their retirement are also those who are unlikely to take advantage of a tax free savings scheme.

Geektastic

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#1171857 9-Nov-2014 22:22

JimmyH:
Geektastic:
JimmyH:
Geektastic: So, why do we think kiwis are not offered something available in many comparable countries?

I guess because:

1. The revenue loss would have to be made up by higher taxes on something else - assuming people want government services and entitlements to be maintained, and

2. The Treasury and successive governments (rightly or wrongly, on which I have no view) are of the view that tax incentives that apply only to certain favoured savings types just cause savings to be moved around from one option to another, rather than achieving all that much in terms of increased savings or better outcomes.

There is a reasonable case to be made that it is a good idea to forgo a bit of tax revenue in order to encourage retirement saving - it could be less costly than using taxes later to support retired people who did not make adequate provision.

Yes, but see point (2). I think that the advice that has been put to governments is that tax incentives on designated schemes don't actually do much to encourage retirement savings - what they do is shift savings from other avenues into the tax favoured one.

Ah but if access to them is restricted by age (i.e. Kiwisaver) then surely that does encourage retirement savings?

Geektastic

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#1171858 9-Nov-2014 22:25

Sidestep:
Geektastic:There is a reasonable case to be made that it is a good idea to forgo a bit of tax revenue in order to encourage retirement saving - it could be less costly than using taxes later to support retired people who did not make adequate provision.

Unfortunately those who haven't made adequate provision for their retirement are also those who are unlikely to take advantage of a tax free savings scheme.

Sure but as long as a reasonable number do, it reduces their costs even if it does not reduce all the costs.

Unless you're prepared to allow those who lack personal responsibility to die in the gutter, you're always going to have a minimum cadre of net takers in any system like that.

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Sidestep

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#1171905 10-Nov-2014 07:55

If NZ introduced a Tax Free Savings option I'd make full use of it.

That's because I think NZ Super is unsustainable as it is - and I'm not expecting it to be there for me when I reach retirement age.

It sure seems that the government has to make some big and unpalatable changes sooner or later.

Capital gains on property? Raising the age of Super?
Maybe Kiwisaver will be tweaked to make it more attractive..

mattwnz

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#1172082 10-Nov-2014 11:42

Sidestep: If NZ introduced a Tax Free Savings option I'd make full use of it.

That's because I think NZ Super is unsustainable as it is - and I'm not expecting it to be there for me when I reach retirement age.

It sure seems that the government has to make some big and unpalatable changes sooner or later.

Capital gains on property? Raising the age of Super?
Maybe Kiwisaver will be tweaked to make it more attractive..

The problem is they have changed kiwi saver to make it less attractive. One problem with it is they allow you to withdraw a lot of it to buy a house which further puts up property prices. It is a retirement scheme, so shouldn't be allowed to be accessed until that time. There is a tax already with kiwi saver in that the government gives you tax credits by topping it up with up to about 500 dollars every year. But again this has been reduced from what it once was.
The government has already said the current retirement support scheme is sustainable, and they need not introduce new taxes.

jpoc

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#1172201 10-Nov-2014 13:34

NZ has no capital gains tax therefore, if you can arrange your savings such that they only ever make capital gains and never return an income then you would at least be tax free on the wealth that your savings scheme generated.

Oh look. That is why Kiwis worship the property market.

There are other ways that you can invest your savings to achieve capital gains and not income.

Fine wines, stripped bonds, shares bought ex-dividend and sold before the next payout or even shares in companies that do not make dividend payments.

Forestry assets can also be bought and sold so as to generate zero income but with a large capital gain.

All of the above should be available to a Kiwi investor and they would all return capital gains and zero income. Shares of course carry risk but wine and stripped bonds issued by nations such as Germany are very low risk though there would of course be currency risk.

The thing with all of the above though is the quality of the investment and the size of the return. You might find that an investment that is taxed returns you more wealth in the end than one that is not taxed but that has a lower return.

Geektastic

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#1172209 10-Nov-2014 13:51

Jase2985: but the way the left looks at it only the rich ie right supporters can afford to save so its a policy that favors those on higher incomes

Which is partly why they are doing so badly in so many countries now.

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