KiwiSaver

Make sure you are on the right tax (PIR) code for KiwiSaver before end of March 2017 – to possibly avoid paying too much tax!!!

Shai Patel

It’s fast approaching that time of year again when you need to ensure that you are on the correct Prescribed Investor Rates (PIR’s) for the current tax year (ending 31 March 2017).

If you have invested in  KiwiSaver scheme, then you will have a prescribed investor rate (PIR).

What is a prescribed investor rate (PIR)?

A PIR is:

  • the tax rate that your KiwiSaver use to calculate the tax on the income it derives from investing your contributions.
  • based on your taxable income, eg income from salary, wages and any additional sources of income that you would include in your income tax return.

We recommend you review and confirm that you are on the correct PIR rates.

If you are on the wrong code, then:

  • If you are on a lower rate (e.g. 17.5% rather than 28%), then the IRD ask you to file a tax return for under deduction and penalties may apply.
  • If you are on a higher rate (e.g. 28% rather than 10.5%), as it is a final tax, there will not be any refund for over deduction

See below a chart that helps ascertain what rate you should be on.

Please feel free to contact us if you need further advice – info@insurenz.co.nz or call 09 551 3500.

Government may scrap KiwiSaver ‘holiday’

Shai Patel

The Government is considering changing regulations around KiwiSaver holidays after calls from retirement chiefs to tighten the rules.

The Commission for Financial Capability wants five-year payment breaks scrapped with payment breaks rolled over one year at a time.

It also wants the word “holiday” replaced with “suspension” because it fears the word holiday sounds too upbeat and may be encouraging savers to think of it as a positive.

James Hartley of the Ministry of Business, Innovation and Employment said it was considering the requests for change to the voluntary, work-based savings scheme.

“The Government is considering the Commission’s recommendations, including those relating to the KiwiSaver contributions holiday, and will respond to those recommendations in due-course,” Hartley said.

The Commission’s general manager investor education, David Boyle, said the changes were essential to take KiwiSaver from “infancy to adolescence” in good shape.

He was admandent the work “holiday” needed to go.

“That word gives the wrong impression that it’s something good,” he said.

“New Zealanders need to be made aware how financially damaging taking a five year break can be – it shouldn’t be seen as a holiday.”

Boyle pointed out suspending payments meant losing not only the employee and employer’s contribution but also the $521 annual tax credit.

He said if the “suspensions” were reduced to one year people could reassess their financial situation and if necessary take another year.

“A lot of people are on a “holiday” when they have recovered financially.”

“Some actually forget they have stopped paying into their KiwiSaver.”

Boyle said taking a holiday on an income of $35,000 meant a loss of more than $2600 a year including the tax credit.

“Losing that amount has a huge impact on someone when they have stopped working.”

More than 765,000 people were taking a break from payments in the last financial year, to June 2016.

And that number was increasing each year, according to Financial Markets Authority data.

Savers can take a break of up to five years. But a five-year break at age 25 would cost around $40,000 by the time savers reach 65.

ANZ, New Zealand’s largest KiwiSaver provider, says that more than 80 per cent of its members who ask for a contributions holiday take it for the maximum five years. Many then roll over onto another holiday when the first finishes.

Source

Free Will – Is your KiwiSaver balance above $15,000

Shai Patel

KiwiSaver over $15,000? Your need a Will!

Money Week kicked off on 5 September and it’s a good time to reflect upon your financial well-being – including your retirement savings.

As part of their commitment to ensuring everyone has an estate plan, Perpetual Guardian – New Zealand’s leading trustee company – are offering free Wills to people who have KiwiSaver balances of $15,000 and over*.

If you have more than $15,000 in your KiwiSaver but you don’t have a Will, your loved ones will have to go through the emotional and financial stress of applying for formal administration through the court. With many KiwiSaver balances well over this amount, would your family be left in the lurch?

A Will allows you to provide for your loved ones and ensure your assets go to the right people.

To take advantage of this offer,  Click Here between 5 – 11 September.

For more information on how to take up this offer, please contact Shai Patel on 09 551 3500.

Take care of things today.

 

*Terms and conditions apply.

KiwiSaver – Changes to First Home Buyers HomeStart Grant

Shai Patel

The Government have announced that they will be increasing the income caps for those who want to use the KiwiSaver HomeStart scheme,  from:

  • $80,000 to $85,000 for a single person and
  • $120,000 to $130,000 for a couple e.

They have also announced that they will increase the house price caps:

  • Auckland will be $600,000
  • Wellington, Christchurch, Nelson, Hamilton, Tauranga and Queenstown will be $500,000
  • Rest of NZ will be $400,000

KiwiSaver HomeStart grant

After 3 years of contributing to KiwiSaver, you may be entitled to a KiwiSaver HomeStart grant. The grants are administered by Housing New Zealand and will be paid to your solicitor.

What the grants are worth

The two HomeStart grants are:

  • For purchasing an existing home, the grant is between $3,000 and $5,000 based on $1,000 each year of KiwiSaver membership.
  • For building or purchasing a new home, or for purchasing land to build a new home on, the grant is, in effect doubled to, $2,000 per year of membership in the scheme, up to a maximum of $10,000 for five years for each member.

There are maximum values of grants payable for the purchase of a single dwelling, regardless of the number of eligible purchasers:

  • $10,000 for the purchase of an older/existing property
  • $20,000 for the purchase of a new property.

Getting a KiwiSaver HomeStart grant

To be eligible for a KiwiSaver HomeStart grant you must:

  • have been contributing the required minimum amount to KiwiSaver for at least three years
  • be 18 years or over
  • be purchasing or building your first home (see “Note” below)
  • have a household income (before tax) of less than $80,000 per year (for one person), or less than $120,000 per year (for two or more people)
  • have a deposit that is 10% or more of the purchase price, including the addition of the grant
  • be planning to live in the house for at least 6 months from the settlement/completion of the property.

Note

If you’ve owned a home before, in some circumstances you may still be eligible for a HomeStart grant. Housing New Zealand will need to determine that you are in the same financial position as a first home buyer.

 

Source

What is Compound Interest?

Shai Patel

The magic of compounding interestCompound interest is almost like magic. It makes dollars multiply before your eyes.

Let’s say you start with $1,000 in the bank. If the interest rate is 4%, you’ll have $40 more in the account at the end of the year. That’s simple interest. But in a year or two, you earn interest not just on the original $1,000, but also on the $40 in interest you’ve already earned.

In other words, your interest earns interest. That’s compound interest.

Click here for a great video explaining compound interest

What Happens To KiwiSaver if you Die?

Shai Patel

www.insurenz.co.nz

KiwiSaver is an asset that is in your name only. So if you were to die, then the funds will go into your estate.

Once an investment goes over $15,000, you will need a Will to decide where the funds should go from your KiwiSaver. Many people now, have a KiwiSaver balance that is over the $15,000.

If a person dies without a Will (Intestacy) – the court will appoint an administrator and distribute your estate according to the Administration Act 1969 – this can be lengthy and costly and there is no guarantee your assets will go to those you intended to inherit.

So it is important that you have an updated Will to make sure that the funds you have in KiwiSaver go to the people you wish to.

If you would like more advice or KiwiSaver or Wills, then please contact us.

 

source

KiwiSaver HomeStart Grant

Shai Patel

Did you know that you could be entitled to a Grant to buy your first home if you are in KiwiSaver?

After 3 years of contributing to KiwiSaver, you may be entitled to a KiwiSaver HomeStart grant. The grants are administered by Housing New Zealand and will be paid to your solicitor.

What the grants are worth

The two HomeStart grants are:

  • For purchasing an existing home, the grant is between $3,000 and $5,000 based on $1,000 each year of KiwiSaver membership.
  • For building or purchasing a new home, or for purchasing land to build a new home on, the grant is, in effect doubled to, $2,000 per year of membership in the scheme, up to a maximum of $10,000 for five years for each member.

There are maximum values of grants payable for the purchase of a single dwelling, regardless of the number of eligible purchasers:

  • $10,000 for the purchase of an older/existing property
  • $20,000 for the purchase of a new property.

Getting a KiwiSaver HomeStart grant

To be eligible for a KiwiSaver HomeStart grant you must:

  • have been contributing the required minimum amount to KiwiSaver for at least three years
  • be 18 years or over
  • be purchasing or building your first home (see “Note” below)
  • have a household income (before tax) of less than $80,000 per year (for one person), or less than $120,000 per year (for two or more people)
  • have a deposit that is 10% or more of the purchase price, including the addition of the grant
  • be planning to live in the house for at least 6 months from the settlement/completion of the property.

Income and house price caps will apply.

Source

Should Children Join KiwiSaver?

Shai Patel

When KiwiSaver first started, the Government were giving a $1,000 kick-start for joining KiwiSaver as an incentive to join. This meant that everybody would get this and so it was definitely a good idea for children to join, even if no money was then contributed.

On 21st May 2015, the Government removed this kick start and so now is it worth joining?

The things to bear in mind are:

  • that most KiwiSaver providers charge a fee (this can vary from $23 – $50 a year)
  • they usually have a percentage charge for any money that is in KiwiSaver

What can happen is if there is little or no money in the account, this could lead to a negative balance. – ‘The law says if you have a zero balance the provider may tell you that it is closing you account’

One thing that KiwiSaver does do is help people understanding savings and investing – so to be able to teach children how KiwiSaver works and for them to see the balance grow and fall over the years is priceless.

So to start a KiwiSaver plan for children may not work as the account may be closed down if the there is a negative balance. But if you are willing to contribute a small amount for them, it could really work well to show the next generation how investment and money work. (Remember they do not get the member tax credit of $521 until they are 18)

For a no obligation chat please contact us on 09 551 3500 or  Click here

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Can you use KiwiSaver to buy land

Shai Patel

The first-home withdrawal can be made, provided you meet the criteria:

  • You have been in KiwiSaver for at least three years;
  • The land is intended to be your main place of residence;
  • You have not at any time held an estate in land (alone or as a joint tenant or tenant in common). (i.e. you have never owned a property)

So in short, YES you can use KiwiSaver to buy land. BUT, you are not allowed to withdraw your KiwiSaver to pay for the cost of building a new home only.

Click here for article

Are You One Of The 1 Million People Not Making The Most Of Their KiwiSaver?

Shai Patel

The were over a 1 Million people in KiwiSaver that either did not receive any or only received some of the Governments $521 subsidy because they did not transfer $1,043 into there account.

How to get your $521 – Make sure you do not miss out!!!

• Ensure you are putting in a least $20 a week to your KiwiSaver account
• If you earn under $35k, increase your contribution rate from 3 to 4 per cent
• Check how much you have contributed with your provider and do a one off top up before June 30 to reach the $1043 minimum

We can help you make sure that you are in the right KiwiSaver fund and making the most of your Retirement Savings. Please contact us for more information.

Click here for article