The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July. The maximum value of the tax credit is the lesser of $1,040 or the total of your contributions for the year. If you have put in $900 through deductions from your pay, then your tax credit will only be $900. By putting an extra $140 into your account before the end of June you will get the full tax credit of $1,040.
If you are contributing 2% of your pay into KiwiSaver and you earn less than $52,000 a year, or if you are contributing 4% of your pay and you are earning less than $26,000 a year, you will need to top up your KiwiSaver account to get the full tax credit. To find out how much you need to top up your account by, check your contributions with either your product provider or your financial adviser.
If you are self employed or not working and under the age of 65, you can still become a KiwiSaver member by joining directly with the provider of your choice. By contributing $1,040 a year as a either a single payment or $84 a month you will get the full benefit of the tax credit. It is not too late to join now. New members will receive the Government kickstart payment of $1,000 and a tax credit for the first year based on the number of days of membership.
Get your payments in as soon as possible to allow time for processing!
The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.
Owners of investment property have been able to deduct depreciation from their rental income, thus reducing the amount of tax they pay on rental income and in many cases resulting in large tax rebates. These rebates were used to repay money borrowed for the purchase of the property. From April 2011, investors will no longer be able to claim depreciation on most properties. Some investors with large portfolios will find it difficult to make debt repayments without this tax break and may be forced to offload properties. Investors who tough it out and keep their properties will find they need to increase rents to get a decent return. There will be a shortage of rental properties which will ultimately put even more pressure on rents.
The other group of losers from this budget will therefore be those who are renting. On the plus side, the sell-off of investment properties will keep prices low for first-home buyers and it will become more attractive to buy rather than pay high rent.
While income tax rates have been lowered, GST has been increased and this creates an incentive for people to save so as to get the maximum benefit from tax cuts. Over 60% of eligible people have not yet joined KiwiSaver, and this should be a priority for savings. The minimum contribution for KiwiSaver is 2% of pay and tax cuts will be around 1.5%. The message is clear; save and you win, spend and you lose.
The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July. The maximum value of the tax credit is the lesser of $1,040 or the total of your contributions for the year. If you have put in $900 through deductions from your pay, then your tax credit will only be $900. By putting an extra $140 into your account before the end of June you will get the full tax credit of $1,040.
