Are KiwiSaver Contributions Taxed?
KiwiSaver contributions are subject to taxation in New Zealand. There are two main types of tax that may apply to KiwiSaver contributions:
Member Tax Credit (MTC): The government offers a special benefit called the MTC to help KiwiSaver members save for their retirement. This benefit is like getting free money from the government, and it goes straight into your KiwiSaver account. To qualify for the MTC, you need to make a minimum yearly contribution, but there is a limit to how much you can get each year. The best part is that this money is not taxed, so it’s a great way to boost your retirement savings.
Tax on KiwiSaver Earnings: If you contribute to KiwiSaver, the money you earn from your investment might be subject to tax. This tax is known as “PIE tax”, and it depends on your income level. The higher your income, the higher your tax rate will be. But the good news is that sometimes the PIE tax rate can be lower than your regular income tax rate. So, it’s important to figure out your prescribed investor rate (PIR) and understand how it affects your KiwiSaver earnings.
Read More: KiwiSaver Tax – Everything you need to know
It’s worth noting that the tax on your KiwiSaver earnings is not something that you need to worry about too much. Rather than you having to calculate and pay the tax yourself, your KiwiSaver provider usually takes care of it on your behalf. Essentially, they work out how much tax you owe on your earnings and then pay it to the Inland Revenue Department directly. So, you don’t need to take any action yourself, as your provider will handle it all for you.
In simple terms, while your KiwiSaver contributions and the Member Tax Credit are not taxed, the money you earn through your contributions could be taxed.