Tax Breaks for Kiwi Saver

Winston Peters may have let slip that the budget looks likely to include targeted tax breaks – but only if you put money into Kiwi Saver.

This isn’t as desirable as universal tax cuts, but isn’t necessarily a bad thing. Will be interesting to see details if true.

If one is self employed, but pay yourself a salary of $100,000 a year through your company, then Kiwi Saver may be very beneficial. The 4% the employer puts in and the 8% you put in could all be tax deductible. So that’s a tax reduction of $4,680 a year or $90 a week for those on $100,000. Plus you get $6,000 lump sum ($1,000 now and $5,000 in five years). Almost $5,000 a year less tax in return for investing $12,000 into Kiwi Saver – a great rate of return.

Not so good for the person on $30,000. Their tax cut will be $480 (based on 20% average tax rate on 4% of $30,000).

So could be quite amusing if Dr Cullen is going to give someone on $100,000 ten times the tax cut of someone on $30,000. Of course this is speculation, but we will see.