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Employee Summary

Published 19 December 2007

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New legislation for KiwiSaver has been passed. Here are the most important points that you need to know about:

Compulsory employer contributions

From 1 April 2008, if you're 18 and under the age of eligibility to withdraw from your KiwiSaver scheme, you may be entitled to an employer contribution into your KiwiSaver account or your complying superannuation fund - as long as contributions are also being deducted from your pay.

Employers will start by contributing an extra 1% of your gross salary, and raise that by 1% each year until a maximum of 4% is reached by 2011. Here's a quick breakdown of the compulsory employer contributions:

Date from % of your gross salary or wage
1 April 2008 1%
1 April 2009 2%
1 April 2010 3%
1 April 2011 onwards 4%

There are some exceptions, for example, if you already receive an employer contribution to another superannuation scheme.

The Government will give your employer up to $20 a week to help them meet the cost of making contributions, so in the first year it won't cost your employer anything if you earn less than $104,000 a year.

Initially, your employer's compulsory contributions must be on top of your regular pay. This applies despite any agreements your employer may have made before the date of enactment of the Taxation (KiwiSaver) Act 2007 (19 December 2007). But after that date your employer can offset their contribution against pay movements, as long as this is negotiated in good faith with you.

ACC and paid parental leave payments

If you're a KiwiSaver member receiving ACC or paid parental leave, you won't receive employer contributions from ACC or Inland Revenue.

2 + 2 employer/employee arrangements

While an employee usually contributes a minimum of 4% of their gross salary or wages, there is another way of doing this. If you and your employer agree, up until March 2010 your contribution can be made up of 2% from your salary and 2% matched by your employer. From April 2010 you'll both need to contribute 3%, rising to 4% each from April 2011 onwards.

Date from Employer contribution Your contribution
1 April 2008 2% 2%
1 April 2010 3% 3%
1 April 2011 onwards 4% 4%

First home buyer criteria

If the Housing New Zealand Corporation determines that a previous home owner is in the same financial situation as a first time buyer, they may also be eligible for the first home withdrawal.

After being a member of KiwiSaver for three years, eligible previous home buyers may be able to withdraw all or part of their savings, including any voluntary employer contributions with vesting restrictions, but excluding the $1,000 government kick-start and the member tax credit, to put towards buying their home.

If they've been contributing around 4% of their income to KiwiSaver or another approved superannuation scheme, they may also be entitled to a first home deposit subsidy.

Definition of salary and wages

The definition of salary and wages used to determine which payments need to have contributions deducted from them is changing. From 1 April 2008 if you're a KiwiSaver member, contributions won't be deducted from:

  • redundancy payments
  • accommodation benefits
  • overseas living and accommodation allowances.

Eligibility to join KiwiSaver

From the date of enactment of the Taxation (KiwiSaver) Act 2007 (19 December 2007), the residency requirement for people joining KiwiSaver is now that they are living or normally living in New Zealand. They must also be:

  • a New Zealand citizen or entitled to stay in New Zealand indefinitely, and
  • under the age of eligibility for New Zealand Superannuation (currently 65).

Private domestic workers

Private domestic workers can choose to fund their own employer contributions. If they do this they are also eligible for the employer tax credit.

Serious illness definition

The definition of serious illness has changed so that a member can only withdraw their funds under serious illness when they are permanently and totally disabled, or near death. However, they will be entitled to withdraw the total accumulation in their KiwiSaver account, including the current value of the $1,000 kick-start and any member tax credits and employer contributions they have received.

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