Turn $20 into $35,901
By Michael Raynes, Head of Distribution & Communications
08 September, 2017
There has been a lot of talk recently about Member Tax Credits or in plain language, the annual government contribution of up to $521.43 into your KiwiSaver account. The real story is the surprising number of eligible New Zealanders who are not collecting the free money that they are entitled to. The Commission for Financial Capability estimates that over one million Kiwi’s are missing out on up to $300 million of government KiwiSaver subsidies.
Don’t let MTC stand for Missed Tax Credit in your life if you can afford not to.
So why might you miss out? The answer is relatively simple: it all comes down to what you are contributing.
What can you get and who can get it?
If you’re between the ages of 18 and 65, for every $1 you contribute to your KiwiSaver account, the government will contribute 50c up to $521.43. In other words, $20 saved, gets you $10 back. It doesn’t matter whether you are working or not.
If you can’t afford to save $20 per week, you’ll still be rewarded for what you can save. For example, saving $500 will get you $250 back.
What employees need to know
If you’re employed and earning more than $35,000 and putting in a minimum of 3% of your salary ($1,050) the good news is you should be receiving the full $521.43 government subsidy. Even better is the fact that you don’t need to do anything to claim this money, it will automatically be paid into your KiwiSaver account.
If you’re employed and earning less than $35,000 you can still collect the full $521.43 subsidy by topping up your account to ensure you have put in the equivalent of $20 per week or $1042.86. Remember the $1042.86 needs to be money you have paid yourself and doesn’t include the contributions from your employer.
What self-employed or not employed members need to know
If you’re self-employed or not employed you’ll be pleased to know that you are eligible for this government subsidy too. The same rules apply — for every $1 you put in the government will give you 50 cents up to a maximum of $521.43. So if you contribute $1042.86 or more you will get the full $521.43. There’s no better guaranteed return on your money. If you can afford to contribute why wouldn’t you?
I’m on a contributions holiday so it doesn’t matter
If you’re on a contributions holiday it might be time to revisit your plan as by not contributing you not only miss out on government contributions but employer contributions too. If you decide you’re not ready to commit to contributing regularly you can make voluntary payments into your KiwiSaver account — yes, really! This means that if you contribute $20 per week or $1042.86 within the KiwiSaver year then you will receive the full $521.43.
It’s only $20, who cares?
True but when you look at how money works over time, small amounts grow into serious money. In this case, $35,901. The Commission for Financial Capability estimates that’s what the $521 a year contribution will be worth for someone in KiwiSaver who starts now at age 18. By the time they’re 65, and adjusting for fees, taxes and inflation, getting that annual contribution will mean they have $35,901 more.
Don’t miss out any longer!
The easiest and most flexible way to contribute is to set up a weekly direct debit of $20 — that way it takes care of itself every year. Click the link below to do it online now.