KiwiSaver and Tax Changes
KiwiSaver gutted, taxes put up on low income workers
A kick in the guts for KiwiSavers
National are taking $3bn out of government support for KiwiSaver, removing compulsory employer contributions above 2 per cent. As a result the average worker with a KiwiSaver account could stand to lose more than $200,000 over their working life.
Unions have five main issues with the National-led government’s plans for Kiwisaver:
- The removal of the employer tax credit.
- Capping employer contributions at 2 per cent. Instead unions wanted 2 per cent that to be an option, with 4 per cent as the automatic starting point but with the ability to opt for 2 or 8 per cent.
- The removal of the $40-a-year fee subsidy.
- The tax free portion of employer contributions has also been reduced to 2 per cent.
- There will be less protection for KiwiSavers that their KiwiSaver payments won’t be offset against wage increases.
Workers to pay the employer contribution
In the New Zealand Herald on Saturday 13 December KiwiSaver expert Mary Holm stated, "the government will permit employers to negotiate - in good faith - contracts under which non-KiwiSavers receive bigger pay rises to compensate for not getting KiwiSaver employer contributions. KiwiSavers will miss out on that extra money, so they will, in effect, be paying their own employer contributions."
Removal of the employer tax credit will also increase the pressure on employers to take KiwiSaver contributions out of wage increases.
Working families excluded from tax cuts
While National has proposed a $10 a week rebate from next year and $15 week the year after, anyone receiving Working for Families or NZ Super will not qualify for this rebate. As a result low income working families will be worse off.
Low waged workers pay more tax under National
Some low income workers will pay more tax under National. Using NZIER’s tax calculator (link opens an excel sheet) a worker on $20,000 a year would pay $5.72 a week more tax in 2010 and $8.65 more a week in tax in 2011.
That means a two-child low income family where the parents work 50 hours a week to earn $50,000 in 2010 will pay around $300 more tax a year. But high income family earning $120,000 in the same circumstances will pay $900 a year less tax.
