KiwiSaver - a general guide for employers

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This guide summarises KiwiSaver from an employer’s perspective and details the employers’ obligations and provides answers to the questions employees will ask. It is based on the KiwiSaver provisions as they apply in July 2014.

Sections

  1. Overview
  2. Eligibility
  3. Contributions
  4. Government inducements
  5. Benefits
  6. Providers
  7. An employer's compliance obligations
  8. Payroll issues
  9. First home subsidy
  10. Appendices

 

1. Overview

1.1 KiwiSaver started on 1 July 2007. A history of the KiwiSaver provisions is set out in Appendix C.

1.2 KiwiSaver is brand for a voluntary taxpayer-subsidised, employee-focussed, personal retirement savings regime. It is however, not limited to employees. New Zealanders and other residents with permanent residence status, including the self-employed, beneficiaries, stay-home parents and children, can also join.

1.3 It affects every employer in New Zealand. Every employer must make payroll deductions, through the PAYE tax system, for any employee who is required to, or chooses to, save to a KiwiSaver scheme.

1.4 Under KiwiSaver, employees who join:

• must save a minimum of 3% of their total gross taxable pay, through the PAYE tax system.

• can, at their option, increase the minimum to 4% (or 8%), through the PAYE system and reduce it back to the minimum at anytime.

• can make additional voluntary savings direct to their KiwiSaver scheme provider. There are no rules on this other than what the provider may impose.

• choose which of the KiwiSaver schemes their money will be invested in, and can change schemes as they wish. Under the overall KiwiSaver brand, there are a range of private sector KiwiSaver schemes that New Zealanders can join.

1.5 Employers must subsidise an employee’s savings if the employee is under their KiwiSaver Retirement Age. The current employer subsidy is 3%. Employers can pay a higher level of subsidy than the required rate, though the higher level will be taxed.

1.6 The employer subsidy is subject to ESCT. This is the same as employer contributions to superannuation schemes generally. Since 1 April 2012, there have been no tax advantages for employer contributions to KiwiSaver relative to other superannuation schemes.

1.7 Contributions accumulate with investment earnings and are generally locked-in for retirement. The account balance becomes payable from the New Zealand Superannuation age (currently age 65). A five year minimum membership period applies to those who join after age 60. Benefits are paid as lump sums.

1.8 KiwiSaver is built on the principle that all new employees are automatically enrolled and will have contributions deducted from their pay. This occurs alongside the PAYE tax system and contributions are forwarded (with PAYE tax) to the IRD. The IRD then forwards contributions to the employee’s chosen KiwiSaver scheme. An employer need not know which KiwiSaver scheme an employer is in.

1.9 The automatic enrolment applies to all new employees (18 or older and under 65), who are not casual or short-term, who join an employer. This applies unless the employer has an alternative existing scheme for the new employee that exempts it from the auto-enrolment rules. Other employees (including existing employees) can join, but have to voluntarily “opt-in”.

1.10 Employees who are auto-enrolled, but who do not want to stay members or cannot afford to save, can after 2 weeks (and before the end of 8 weeks), opt-out. Having joined (or having failed to opt-out) the minimum savings (3% of pay) must continue for at least the first 12 months’ membership.

1.11 After 1 year, employees who are members and wish to stop saving temporarily, can go on a contributions holiday by telling the IRD. Prior to 1 year they have to apply to the IRD and can only do so on the grounds of financial hardship.

1.12 To encourage people to join and save (and if an employee auto-enrolled does not opt-out), the government:

• contributes a one off, tax-free lump sum of $1,000, and

• subsidises a member’s savings at $1 for each $2 saved by the member up to a maximum subsidy of $521.43 a year ($10 a week).

1.13 The government also provides a first home deposit subsidy of up to $5,000.

1.14 To help employees, employers can:

• operate an alternative “exempt” scheme, so that new employees are not automatically enrolled (but can still voluntarily choose to join if they wish). This is not available to all employers.

• subsidise an employee’s contributions above the statutory minimum.

• select a single KiwiSaver scheme (known as a “chosen scheme”), for employees who don’t make their own choice of a KiwiSaver scheme. If the employer doesn’t have a chosen scheme and the employee doesn’t choose a scheme, the IRD randomly allocates the employee to one of the nine default KiwiSaver schemes (AMP, ANZ, ASB, BNZ, Fisher Funds, Grosvenor, Kiwibank, Mercer or Westpac).

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2.0 Eligibility

Employees

2.1 When an employee first joins KiwiSaver they have to be under age 65. KiwiSaver applies to all employees who are New Zealand citizens or are entitled to be in New Zealand indefinitely and in each case currently, or ordinarily, lives in New Zealand. A civil servant working outside New Zealand can also join.

2.2 New Zealanders over age 65 cannot join, but can remain KiwiSaver members if they joined before age 65.

New employees

2.3 Auto-enrolment applies to all new eligible permanent employees, aged 18-64. This is regardless of their pay level or hours worked. Auto-enrolment applies except where the employer offers an alternative scheme for all new employees and has been granted “exempt” status.

2.4 A “Permanent employee” is an employee, other than a casual agricultural worker, who does not have their holiday pay built into their hourly rate and are employed on a contract that is for a period longer than 28 days, or that becomes longer than 28 days. In effect, anyone who stays on the PAYE schedule for more than 28 days is “permanent” unless they have their holiday pay built in to their hourly rate.

2.5 An employee automatically enrolled can choose to opt-out, but only in the period from day 14 (2 weeks) and before day 56 (8 weeks), inclusive, of employment. In some cases late opt-outs may be allowed by application to the IRD.

2.6 New employees, when auto-enrolled, have contributions deducted from their pay on their first pay day, even if they intend to opt-out as soon as they can (day 14).

Other employees

2.7 Existing employees who are not KiwiSaver members, who are below age 65, and new employees below 18 (i.e. who are not subject to auto-enrolment), do not have to join, but can. Such employees age 18 or over can complete a contributions deduction notice (KS2) and give it to their employer, or apply direct to a KiwiSaver provider. Employees under age 18 have to apply direct to a KiwiSaver provider.

2.8 An employee who joins using an IRD KS2 form, should also complete a provider’s membership form to avoid being allocated to a default provider.

2.9 An employee who chooses to join by opting in, does not then have the opt-out option.

2.10 Employees and non-employees who join under age 18 need one or both guardians to sign their membership form depending on their age and relationship status.

Non-employees including spouses and children

2.11 Non-employees can also join but must apply direct to a KiwiSaver provider. A “non-employee” includes the self-employed, non-working spouses, beneficiaries and children.

2.12 There are advantages in employers making sure that their employees are aware of the rules for their children and spouses.

2.13 There are special enrolment rules for children. Children under the age of 16 need both their guardians to sign the membership form. Children age 16 and 17 need one guardian to sign.

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3.0 Contributions

Employees

3.1 Employees who participate must save 3% (or 4% or 8% if they choose) of their total before-tax taxable pay. Total before-tax taxable pay includes allowances, bonuses, holiday pay, overtime etc. but does not include redundancy pay.

3.2 A new employee’s contributions start on the first pay day after commencing employment if they are auto-enrolled, or the first convenient pay period after joining if they voluntarily opt-in.

3.3 Contributions continue until the earliest of:

• the day that they opt-out, for auto-enrolled employees;

• the start of a contributions holiday;

• the receipt of their full benefit on retirement.

3.4 If a new employee starts a second new job, under an alternative employer, the contributions are also payable in respect of that second job, unless the employee is on a contributions holiday.

Deductions

3.5 The employer must deduct the employee’s contributions, as part of the PAYE system, and forward them to the IRD with the normal PAYE returns.

3.6 The IRD will forward them to each employee’s KiwiSaver scheme provider. The employer does not need to know which provider an employee has chosen.

Contributions holiday

3.7 Employees who do not opt-out must contribute for at least 1 year, except in the case of significant financial hardship.

3.8 An employee who has contributed for at least 1 year, can choose to stop contributions by advising the IRD. This is known as a “contributions holiday” - see paragraphs 7.21 to 7.27 for more details.

3.9 During the first 12 months, an employee can go on a contributions holiday only with the consent of the IRD, in cases of significant financial hardship.

Non-employees

3.10 Non-employees contribute at the level and at the times they agree with their KiwiSaver provider. There is no minimum or maximum except what the KiwiSaver provider applies. Therefore, the concepts of opting out and a contributions holiday are not relevant.

Employers

3.11 Employers must subsidise an employee’s savings if the employee is 18 or older and under their KiwiSaver retirement age (currently age 65 subject to a minimum of 5 years’ membership). The minimum rate is 3%.

3.12 An employer can voluntarily contribute at higher levels.

3.13 If an employee has not completed five years’ KiwiSaver membership by age 65 and chooses to continue saving, the employer’s contributions must also continue.

3.14 All employer contributions are subject to ESCT and only the net contribution goes to KiwiSaver.

“Existing schemes”

3.15 If an employer has a subsidised superannuation scheme that existed on 17 May 2007 and the employer contributions vests within no more than five years, it has an “existing scheme”. An employer can offset the compulsory KiwiSaver contributions for employees who became members before 1 April 2008 or were eligible to become members before that date.

3.16 The existing scheme exemption does not apply for members who join on or after 1 April 2008 where they were not eligible on 31 March 2008. The vesting test is a period-by-period test.

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4.0 Government inducements

4.1 The government inducements are:

$1,000 “kick-start”

4.2 The government will pay an upfront contribution (or “kick-start”) of $1,000 when the employee’s contributions are first passed on to the KiwiSaver provider by the Inland Revenue. This will be 3 months after contributions start. It also applies to non employees.

4.3 The kick-start is tax free.

MTCs (member tax credits)

4.4 The government will subsidise a member’s contributions. This is known as a MTC (“member tax credit”) and is tax free. Until 30 June 2011, the subsidy is $1 for $1 up to $1,042.86 a year. From 1 July 2011, the MTC reduces to 50 cents for $1.

4.5 The MTC is paid at the end of each year. A “year” for this purpose is 1 July to 30 June. In the first year a proportionate amount is paid based on the number of days the member has contributed during that year.

First home subsidy

4.6 A housing assistance scheme, providing up to $5,000 to help “low and middle-income earners” buy their first home, is also available. This is managed outside the KiwiSaver Act. There are household income and value of house rules.

Employer contributions - ESCT

4.7 Under KiwiSaver, the 2% employer’s contributions are exempt from tax (ESCT) until 1 April 2012. Employer contributions above this level are subject to ESCT.

4.8 From 1 April 2012, all employer contributions are subject to ESCT.

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5.0 Benefits

Benefits payable

5.1 The KiwiSaver provider can pay benefits, on the employee’s request, from the age of eligibility for NZ Super (currently age 65). The employee need not retire to receive the benefit.

5.2 A minimum of 5 years’ membership (not contributions) is required. This affects employees currently joining over age 60.

5.3 Benefits are payable earlier:

• for first home housing assistance, or

• on significant financial hardship grounds, or

• on serious ill health, or

• following permanent emigration, or

• on death.

5.4 In the case of permanent emigration to Australia, benefits are only available by way of transfer to an Australian scheme.

5.5 Benefits are not payable on changing employers.

5.6 Benefits are payable as lump sums and do not affect the person’s NZ Super. Providers can offer additional options but must pay the benefit as a lump sum if the person chooses.

Death

5.7 On death, the benefit must be paid to the deceased member’s estate.

5.8 Where the person dies intestate and has less than $15,000 in their KiwiSaver Account the benefit can be paid direct to one of a defined list of family members. Employees should however be encouraged to have a Will.

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6.0 Providers

6.1 There is a range of private sector KiwiSaver scheme providers. Each offers a range of investment options. Some impose additional rules.

6.2 For a scheme to be a “KiwiSaver scheme”, it must be a registered under the KiwiSaver Act 2006.

6.3 KiwiSaver members can choose any KiwiSaver scheme as their scheme and the provider of that scheme becomes their provider. They can change their provider and therefore their scheme as they decide. The IRD forwards their contributions to their “current” provider.

6.4 Of the different KiwiSaver schemes, an employer can (but does not have to) select a default scheme for its employees. Such a scheme is known as a “chosen” scheme. This becomes the default scheme for the employer’s employees where the employee does not choose their own scheme.

6.5 An employee does not have to join the employer’s chosen scheme. An employer can change its chosen scheme when it wishes and “compulsorily” transfer its employees from the old chosen scheme to the new chosen scheme.

6.6 A limited group of schemes were appointed by the government to be “default” schemes. Default schemes are the schemes for employees who do not choose a scheme and where the employer does not have a chosen scheme. The IRD will randomly select a default scheme from the list for any individual employee. The nine default providers are AMP, ANZ, ASB, BNZ, Fisher Funds, Grosvenor, Kiwibank, Mercer and Westpac.

6.7 Appendix B sets out a discussion on the default providers.

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7.0 An employer's compliance obligations

7.1 An employer’s compliance obligations include:

• auto-enrolling eligible new employees, unless it has a exempt scheme;

• processing opt-out notices;

• processing contributions holiday notices;

• processing contribution deduction notices;

• paying the compulsory employer contributions;

• deducting and forwarding contributions to the IRD, and

• accounting to the IRD for ESCT.

Enrolment of new employees

7.2 When a new employee starts work, and they are not already a KiwiSaver member, with a few exceptions, an employer is required to automatically enrol them and advise the IRD.

7.3 If employees fit all of the following criteria and the employer does not have an exempt scheme, the employer must enrol them:

• they are not currently KiwiSaver members;

• they are under age 65,

• they are age 18 or older,

• they have the right to work indefinitely in New Zealand;

• they are employed to work for a period that is 28 days or longer (this is known as a “permanent” employee).

7.4 If they fit the criteria, except that they are employed to work for a period 28 days or fewer (they are therefore “temporary” at the outset). If their contract is extended (formally or by default) beyond 28 days, they have to be enrolled on day 29.

7.5 The enrolment rules apply equally to full-time, part-time and casual workers. There is no requirement for minimum pay, minimum hours or regular hours. The only exemptions are election day workers, domestic workers and casual agricultural workers, employees where holiday pay is built into the normal hourly rate or where the employer operates an alternative “exempt” scheme.

7.6 If the employee is subject to the automatic enrolment requirements, the employer must:

• give the employee the IRD information pack.

• collect from the employee his/her name, address and IRD number.

• advise the IRD, when it next makes a PAYE return, that the employee has joined.

• start to deduct the minimum contribution from the employee’s gross taxable pay from the first pay day.

• send to the IRD the deducted contributions with the PAYE schedules.

7.7 The responsibility for ensuring that the employer has enough IRD packs falls on the employer. They are available from the IRD.

Opt-out

7.8 An automatically enrolled employee can opt-out during the period from the end of 2 weeks’ work (i.e. day 14 of employment) to the end of 8 weeks’ work (i.e. day 56 of employment). In certain circumstances, late opt-outs (by special application to the IRD) are permitted.

7.9 To opt-out, employees must complete an IRD opt-out notice form. They can give the form to the IRD or their employer. This is the employee’s decision. Employers need to have a process that specifies who the employee must give the form to, if it is given to the employer, and what that person must do with it.

7.10 On receipt of a valid opt-out form directly from the employee, the employer must:

• check that it falls within the six weeks period from the end of week 2 to the end of week 8;

• stop deducting the minimum contribution;

• advise the IRD;

• refund to the employee any contributions already deducted but not yet paid to the IRD. Any contributions already sent to the IRD will be refunded direct to the employee by the IRD.

7.11 If the employee sends the opt-out form to the IRD, the IRD will advise the employer that the employee has opted-out. The employer then needs to stop deducting contributions and refund any contributions already deducted but not yet paid to the IRD.

7.12 The IRD returns to the employer any contributions made by the employer.

7.13 It should be noted that, even if an employee opted-out under a previous employer or under another current employment, if they are not KiwiSaver members when they join a new employer, they will need to opt-out again.

Other employees, not subject to automatic enrolment, can join

7.14 If employees are not subject to the automatic enrolment provisions (such as existing employees), they can still join KiwiSaver. They can either contact a KiwiSaver provider or, if over age 18, give their employer a contribution deduction notice (KS2). In the first case, the employer will be advised by the IRD that the employee has joined. In each case, the employer has to comply with the KiwiSaver contribution requirements.

Contribution requirements

7.15 All KiwiSaver members, who are not on a contributions holiday, are required to save 3% of their gross taxable pay. This is the default savings rate. Gross taxable pay includes overtime, bonuses, leave payments, holiday pay, etc. but does not include redundancy pay.

7.16 The 3% savings are deducted from the employee’s salary/wages each pay day and forwarded to the IRD with the next PAYE schedule. The 3% is based on the gross amount and is deducted after PAYE tax is calculated. In other words, the 3% is not tax deductible to the employee. This means that 3% of gross pay will be more than 3% of net pay.

7.17 Employers are required to subsidise its employees’ savings at 3% of gross taxable pay.

4% or 8% savings rates

7.18 Employees can choose to save at 4% or 8% of gross taxable pay as an alternative to the standard minimum rate. In practice few, if any, employees will choose as it is generally not in their best interests to pay more than they have to secure the maximum member tax credit. However, many employees who prior to 1 April 2009 paid 4%, have retained that level.

7.19 Other employees that will save at higher rates are those that are on low incomes and wish to maximise the government paid MTCs, employees who are saving for a first home and older employees who want to maximise their savings and want the convenience of payroll deductions and are happy with the lock in arrangements. 

“Contributions holiday”

7.20 Contributions, once started, cannot stop for the first 12 months even if the employee wants to, except in some cases of significant financial hardship. The 12 months of contributions paid can be with more than one employer.

7.21 Employees who have not opted-out, and have contributed to KiwiSaver for at least 12 months (with one or more employers) can choose to go on a “contributions holiday”. Under a contributions holiday, they choose to stop contributing for a period of between 3 months and 5 years.

7.22 Before the holiday ends, they can renew their contributions holiday for a further period up to 5 years at a time. Contribution holidays can be continually renewed until they fully withdraw from KiwiSaver, on or after age 65.

7.23 While on a contributions holiday, an employee can resume contributions by giving an employer a contribution deduction notice (KS2). This can’t be given in the first 3 months of the contributions holiday, unless the employer agrees.

7.24 If employees want to go on a contributions holiday, they must advise the IRD who will advise the employer. Employers must act on the notice as soon as practicable. Employees cannot ask employers to stop their savings. They can only tell the IRD.

7.25 Some employees, when they first join a new employer, will be members of KiwiSaver but already on a contributions holiday. In this case, they must give their new employer the IRD’s contributions holiday notice. If they do not give their new employer that IRD notice form, the employer is required to deduct the minimum employee savings until it receives the notice.

7.26 There will be merit in employers having a simple 1 page guide "how do I go on a contributions holiday?" even if all it says is phone the IRD and give the IRD's 0800 number.

Age 65

7.27 When employees reach the age of eligibility for New Zealand Superannuation (currently age 65), they can withdraw their savings from KiwiSaver if they have been a member for at least 5 years. If not, they have to wait until at least the end of the 5 years.

7.28 When a member withdraws from KiwiSaver, the member’s KiwiSaver provider will advise the IRD which will advise the employer. Until the employer is advised, it must continue to deduct savings even if the member is over age 65 (unless they are on a contributions holiday).

7.29 Until members withdraw fully from KiwiSaver, they must still save and employers must deduct the savings and forward the savings to the IRD (unless they are on a contributions holiday).

7.30 Employees who have not completed their 12 months’ contribution period by age 65, must continue to contribute for at least the 12 months.

“Exempt” schemes

7.31 Some employers originally chose to have an alternative scheme(s) that gave it “exempt status”. The advantage of an exempt status is that the automatic enrolment provisions do not apply. The ability to apply for exempt status ended in 2009 will be the exception of employers with existing schemes.

7.32 Employees of employers with exempt status can still choose to join KiwiSaver if they wish and the employer must deduct contributions etc.. Having an exempt status converts KiwiSaver from an opt-out regime to an opt-in.

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8.0 Payroll issues

8.1 Payroll officers will become involved in more than just deducting savings from an employee’s pay and forwarding them to the IRD. In many cases, it will fall on the payroll officer to fulfil the employer’s obligations (see section 7). They will become involved in the enrolment process, responding to employees’ questions about the deduction of savings and in the interface between the employer and the IRD.

8.2 Details of the employer’s obligations fall under the areas of:

• Automatic enrolment

• Deduction of contributions

• Payment of employer contributions.

• Interface with the IRD.

Automatic enrolment

8.3 Because of automatic enrolment, the first obligation relates to determining whether a new employee must be enrolled. If they are required to be enrolled, the enrolment process must be followed (refer paragraph 7.6).

Contribution issues

8.4 It will be up to the payroll officer to calculate contributions and pay them to the IRD.

8.5 The standard contribution rules to KiwiSaver are either:

• 3% of total gross taxable pay - this is the default rate; or

• 4% of total gross taxable pay, if the employee chooses this higher rate; or

• 8% of total gross taxable pay, if the employee chooses this higher rate.

8.6 In addition, the employee may choose, if the employer lets them, to make additional voluntary employee KiwiSaver savings by payroll deduction. These are paid to the KiwiSaver scheme direct. Few employers will allow this.

Gross taxable pay

8.7 Employee savings are based on total gross taxable income. This includes all overtime, bonuses, taxable allowances and taxable payments made on leaving employment other than redundancy pay. This will often vary from one pay period to another. Issues will also arise on the payment of taxable allowances.

8.8 Payroll systems will need to be set up to ensure that they can calculate total gross taxable pay correctly and apply the correct contribution calculation. This will mean being able to clearly distinguish between all forms of taxable income and non-taxable income. The main problem area will be special lump sum payments like bonuses, taxable business expenses and holiday pay.

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Switching between rates

8.9 The second issue relates to the 3%/4%/8% rates and the ability of the employee to switch between. Employees can change whenever they wish, provided that the new rate applies for at least 3 months (unless the employer agrees otherwise).

8.10 We would not expect many employees to contribute at 4% or 8%, as the extra savings are locked up until age 65, but they can. A process will be required to handle the changes. Most employees, if they want to save extra, would prefer to save them under a non-KiwiSaver scheme as, subject to any rules of the employer, they need not be locked up until retirement age.

8.11 Payrolls will need to have processes in place to handle the forms for changes to the savings rates.

Contributions from first pay day

8.12 Under the KiwiSaver rules, the savings in respect of a new employee apply from the first pay day.

8.13 The current default employee rate is 3%. Savings at the 3% rate will need to be deducted from the first pay day. In many cases, this will be before the employee can opt-out and before they have read the IRD information pack given to them when they joined. Employers should ensure that pay slips clearly show the KiwiSaver contributions.

Contributions to IRD

8.14 KiwiSaver savings are forwarded to the IRD each month along with the standard PAYE forms. For large employers, this is on the 5th and the 20th of the month. For other employers, it is on the 20th of the month.

8.15 The KiwiSaver contributions have to be shown separately on the PAYE form by employee. Payroll systems need to report separately the employees’ KiwiSaver contributions.

8.16 In many cases the IRD will not forward them on to the provider straight away. They always hold on to them in the first 3 months and then when the IRD has trouble reconciling them. The payroll officer will get queries about reconciliation from the employee who doesn’t see the contributions deducted from their pay appear in their KiwiSaver Account.

8.17 A contributions holiday period must be for a minimum of 3 months, unless the employer accepts a shorter period, and for a maximum of 5 years at a time. A contributions holiday can be renewed before it expires. Employees may go on a contributions holiday to avoid paying the contributions on a lump sum payment like a bonus. The contributions holiday will apply to all pay, not just the bonus.

Contribution deduction notices

8.18 An employee who is under age 65 and who is not a KiwiSaver member can choose to join KiwiSaver. One way is by giving the employer a contribution deduction notice (KS2). The employer needs a process to handle the notices received.

Employer contributions

8.19 Employers are required to contribute. The employer contributions are subject to ESCT. ESCT is a complex tax and operates differently to PAYE.  See the article 'How to calculate an employee’s ESCT rate'.

Interface with IRD

8.20 Payrolls will need to deal with the IRD mainly in the following areas:

• Advising the IRD when a new employee joins who is subject to the automatic enrolment process. These details are sent to the IRD with the next PAYE monthly schedule.

• Advising the IRD when an employee has opted out by notifying the employer direct.

• Processing opt-out advices received from the IRD where the employee had advised the IRD, rather than the employer.

• Forwarding to the IRD the KiwiSaver contributions deducted. These are sent with each PAYE monthly return together with the employer contributions and the ESCT.

• Processing contribution deduction notices received from employees who are not KiwiSaver members. These may also come via the IRD.

• Processing contributions holiday notices received from the IRD in respect of an employee.

• Responding to queries on short-payments, over-payments etc.

9.0 First home deposit subsidy

9.1 One feature of KiwiSaver is the first home deposit subsidy.

9.2 It is important to recognise that the proposed subsidy is not part of the KiwiSaver Act 2006. The Act refers to the ability to withdraw amounts from KiwiSaver for the purchase of a first home, but not to the payment of the government subsidy or the conditions on which that payment will be made. Instead, it will be governed by regulations administered by the Housing New Zealand Corporation (HNZC). We can therefore expect the rules to change from time to time, depending on the government’s social policy agenda.

9.3 On the basis of the information published on the HNZC web site (www.hnzc.co.nz), the following will apply to members seeking the subsidy:

• The member must have been saving with KiwiSaver for at least three years.

• The member’s total household income has to be below an “income cap”. The income cap will be $80,000 a year for one person and $120,000 if two or more.

• The subsidy is to help buy the first home However, some who are “starting again” may also qualify.

• The subsidy is up to $1,000 for each year the member has saved with KiwiSaver, to a maximum of $5,000 (after 5 years).

• Couples who both meet the criteria, can each apply for a potential total subsidy of $10,000.

Other points

9.4 The maximum value allowable for a house will vary geographically from $485,000 in Auckland and $425,000 in Wellington and Queenstown Lake District, to $300,000 in most of New Zealand.

9.5 The house must be the principal residence i.e. not a bach or investment property.

9.6 Separate to the first home subsidy is the right to withdraw all of the member’s personal savings and the investment earnings from KiwiSaver (i.e. everything except the initial taxpayer funded $1,000 kick-start and the Member Tax Credits). This is also to help with the purchase of the first home. This aspect is covered by the KiwiSaver Act 2006 and is based on membership of KiwiSaver and not saving to KiwiSaver.

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Appendices 

A. What will employers do?
B. Allocation to providers
C. History


1The KiwiSaver Act 2006 establishing KiwiSaver came into force on 1 December 2006.

2“Employer Superannuation Contribution Tax”