Previously called “member tax credits”, the annual Government contribution really is free money!
If you are over the age of 18, and contributing to your KiwiSaver, then you can get up to $521.43 free each year. There are no catches, and it’s easy to get it.
For every $1 that you put into your KiwiSaver (you, not your employer), the government puts in 50 cents, up to the $521.43 maximum. So, to get all of your free money, you just need to put $1,042.86 into your KiwiSaver over the year.
WHO CAN GET THE FREE MONEY?
Anyone who is aged 18 to 64, mainly living in New Zealand.
If you have been a member of KiwiSaver for less than 5 years, then you are eligible to claim the Government contributions for 5 years, even if that takes you beyond the age of 64.
The KiwiSaver year runs from 1st July to 30th June, so it’s not a calendar year we’re talking about. Also, if you join or turn 18 during the year, then you are only entitled to the free money for the proportion of the year you are eligible. The same applies if you turn 65 during the KiwiSaver year; you are only eligible for the period in which you were 64 (unless you’ve been a member for less than 5 years).
If you join KiwiSaver on 1st March, you will be eligible for Government contributions for March, April, May and June, so 4 months, or 4/12 of the year. You are therefore entitled to a maximum of 4/12 of $521.43, which is $173.81. To get this, you would need to put in at least double, so $347.62.
HOW IT HAPPENS
This is the best bit, as there is nothing at all that you need to do to claim the free money!
Shortly after 30th June, your KiwiSaver provider (Booster) automatically claims whatever you’re entitled to from the Government. It then appears in your KiwiSaver account as a government contribution later in July.
If you have earned a salary of $34,762 and contributed at least 3% to your KiwiSaver account over the course of the year, then you should receive the maximum annual Government contribution.
If you have earned less than this, you can top up your KiwiSaver to make sure you get all of your free money.
BUT I’M SELF EMPLOYED
This is one of the most common misconceptions I come across. KiwiSaver can absolutely work for you if you’re self-employed. You won’t be making salary contributions to KiwiSaver, but you can still contribute on a voluntary basis. If you do this and contribute at least $1,042.86 (which works out at around $45 a fortnight, or $90 a month), then you will still get all of your free money.
WHEN CAN I GET IT?
Government contributions can be withdrawn for a first house purchase (the requirement is you leave a minimum balance of $1,000 in your KiwiSaver), so making sure you get the free money from the age of 18 can be a great boost for your first house purchase.
You can also withdraw it at retirement, or any of the other allowable times in between (hardship, serious illness, permanent emigration and death). When you make a withdrawal from KiwiSaver, you have to declare any periods of non-residency. You can’t claim Government contribution withdrawals if they were received in a period when you were not resident.
CHECK HOW YOU’RE TRACKING
If you log into the Booster app or online site and look at Member Tax Credits (they are in the process of updating the name of this to Government contributions), you will be able to see your current entitlement and any shortfall. Work out what is likely to still be coming into your KiwiSaver for the remainder of the KiwiSaver year (ends 30th June), and then top up if required.
You can also text (027 788 8298) or e-mail ([email protected]) at any time if you want to know if you have a shortfall. Just let me know your full name and date of birth and I will let you know where you stand.
NOTE – Contributions can take up to 3 months to arrive in your KiwiSaver from your salary deductions. If you have a MyIR log in, you can go to the KiwiSaver account and see a more accurate picture of contributions that have not yet been sent onto your KiwiSaver provider.
You can either top up your KiwiSaver by setting up a Direct Debit (ask for a form), or making a voluntary contribution via online banking.
To do this online, you need to add a new Payee – search for “Booster KiwiSaver Scheme”. You will be asked to populate your IRD number, Member Number (ask me if you can’t find this) and your name. Once the payee has been saved, you can either set up an automatic payment or just make a one off top-up.
It really is worth making the effort to get this free money. Even if you can’t save the $1,042.86, then anything you put in will help, and you’ll get a 50% return for free from the Government.
If you require personalised financial advice, please get in touch. A disclosure statement is available free of charge and on request.