Non-PAYE earners

If you aren't paid through the PAYE system, for example if you aren't working or are self-employed, you can still join KiwiSaver and receive the savings incentives provided by the Government. You'll need to sign up using the application form in the Grosvenor KiwiSaver Scheme investment statement.

What benefits will I receive?

Even if you're not employed you'll still receive the following KiwiSaver benefits:
- $1,000 kick start contribution from the Government
- Government matching of your contributions via member tax credits of up to $1,042 per year (subject to eligibility criteria- see below). These will be credited directly to your KiwiSaver account.
- The first home deposit subsidy of up to $5,000 provided by Housing NZ. Visit http://www.hnzc.govt.nz to view the eligibility criteria for the deposit subsidy,

How do I contribute?

If you're not receiving salary or wages with PAYE deducted then a 4% or 8% contribution rate does not apply. You can essentially make whatever contributions you like to KiwiSaver. No initial contribution is required.

Contributions can be made directly to the Grosvenor scheme via direct debit, or by choosing Grosvenor as a bill payee on your internet banking. Any contributions made by cheque need to be paid to IRD (see below).

There are three ways to contribute via IRD. IRD will automatically forward the funds to Grosvenor.

1. Use the “Pay tax” option on your bank’s internet banking facility
2. Pay over the counter at a Westpac bank branch.

3. Send a cheque to Inland Revenue. You'll need to make the cheque out to Inland Revenue. On the back of the cheque, write the member's IRD number and "KSS" to indicate a voluntary member contribution. Send your cheque to:

Inland Revenue

PO Box 1535

Waikato Mail Centre

Hamilton 3240

What if I am receiving salary with PAYE deducted, as well as drawings from my business?

If you join KiwiSaver you'll be governed by the same rules that apply to all employees. You'll have to contribute from your salary at your 4% or 8% contribution rate (from 1 April 2009, there will also be the option of a 2% rate). You are free to make voluntary contributions above this amount from your drawings.

In respect of your salary with PAYE deducted, the business will be required to make employer contributions to your KiwiSaver account. From 1 April 2009 these contributions can be received tax free into your account up to 2% of salary. Refer to the heading "Do employers contribute as well as employees?" within the "for employers" section for more details.

Are you entitled to a KiwiSaver member tax credit?

What is the member tax credit?

If you are a member of KiwiSaver or a complying fund, the Government matches your contributions, up to a maximum of about $20 a week. The government contribution is your “member tax credit” (MTC).

MTC is calculated on your own contributions, and any voluntary contributions you’ve made. It excludes employer contributions, any contributions diverted to your mortgage and the $1,000 kickstart from the government.

The MTC is paid annually and the year runs from 1 July to 30 June. Sometime after 30 June each year, your scheme provider claims your MTC from Inland Revenue, and adds it, generally in a lump sum, to your KiwiSaver account.

What do you need to do now?

Nothing! If you’re entitled to the MTC, it will be paid automatically by Inland Revenue to your scheme provider who will add it to your scheme account.

How much can the MTC be?

Your MTC will equal the total contributions you make over the year, up to a maximum of $1,042.86, depending on your start date with KiwiSaver and how much you have contributed.

When is your start date?

How and when you join your scheme is important, because the amount of your MTC depends on your start date (as well as how much you have contributed). You get a full entitlement if you’re a member for the whole year, and a partial entitlement if you’re a member for part of the year.

	Your start date is
If you joined through your employer:	• The first of the month in which your first deduction was made from your pay; or • The first of the month in which your first contribution was received by Inland Revenue, whichever is the earlier.
If you joined directly with a provider:	• The date your provider opened your account, or • The first day of the month that your employer deducted your first contribution; or • The first day of the month that Inland Revenue or your scheme provider received your first contribution, whichever is the earlier.

Examples

• Tony is a self-employed panelbeater. In April 2008 he decided to join KiwiSaver. His provider opened his account on 25 April and Tony made an initial payment on 13 May. Tony’s start date is 25 April.

• Anna, an employee working for the ABC company, wanted to join KiwiSaver. She decided to join XYZ Investments and filled out the forms via her employer on 26 February 2008. Anna’s employer deducted her first contribution on 17 May. Inland Revenue received the payment on 20 June. Anna’s start date is 1 May.

How is the MTC calculated?

Your MTC will be calculated by Inland Revenue, depending on when you became a KiwiSaver member, and how much you have contributed.

In the following two examples, both people joined KiwiSaver as soon as it started, so their MTC is calculated on a full year.

Examples

• Jake is a builder. Over the year, he contributed $880 to his KiwiSaver scheme. His MTC will be $880.

• George is a self-employed panelbeater. His annual contributions totalled $3,120, so he will get the maximum MTC of $1,042.86.

Your entitlement to the MTC is proportional to your time in the scheme, so if you join KiwiSaver part way through the year, you will only be entitled to a part of the MTC.

Example

• Lisa, the financial controller in a large collision repair company, joined KiwiSaver in January. Her contributions from January to June came to $1,700. Lisa’s MTC will reflect that she has been a member for half of the 12-month period. Her MTC will be $521.43 (half of $1,042.86).

Employees, please note that only your contributions count towards your MTC entitlement. Your employer’s contributions aren’t included in the calculations.

When will your MTC start working for you?

It depends when your KiwiSaver scheme provider submits the claim to Inland Revenue – sometime after 30 June, and when it is credited by them to your account. Your MTC should appear on a statement issued by your provider or you may be able to check it on-line with your provider. If you’re an employee and Inland Revenue hasn’t received all your contributions for the year when your provider claims the credit, the balance will be paid later.

Please note the MTC isn’t paid in cash. It is always credited to your KiwiSaver scheme. MTC payments to your scheme are considered “excluded income” for tax purposes, although you will be liable for tax on income you make from the MTC though (i.e. investment earnings etc), and this is paid by your provider so you don’t have to include it in your tax return.

What about under-18s?

The MTC is not available to members who are under 18 years old. If you turn 18 during the year, you’ll get an MTC for the portion of the year that you’re 18.

Do I stop receiving the tax credit when I turn 65?

Not if you have been in KiwiSaver for less than five years. Eligibility continues until you are able to withdraw from KiwiSaver, which will be age 69 for someone who signs up when they are 64. The same principle applies to compulsory employer matching contributions.

Are there other eligibility criteria?

People who don’t primarily reside in New Zealand are not eligible for the MTC, unless they are working overseas for an approved charitable organisation for a token wage, or for the NZ Government.