Government top up ends on 65th birthday
Q. I am going to turn 65 in March 2016. If I do not withdraw my KiwiSaver funds in March but wait to July 2016 and contribute $1043 between 1 July 2015 and my 65th birthday will I be entitled to the full government tax credit of $521?
A. Turning 65 is as important to KiwiSaver members as turning 18. When a person turns 18 they become eligible for Member Tax Credits, based on their contributions for that year. Parents should consider the merit of topping up their son or daughter’s KiwiSaver account, as these funds will help towards a First Home one day. Fast track to age 65 and when you reach that milestone your eligibility for MTC ceases– unless you have been a member for less than 5 years, in which case your KiwiSaver will be locked in until that anniversary arrives and you will still be eligible for MTC.
According to an IRD spokesperson MTC “is calculated on the number of days from 01 July to the day before the member turns 65 based on the amount paid for the year - whether this be before or after the member turns 65.”
With a birthday in March I estimate you will be entitled to between $390 and $430 in MTC if you have contributed at least twice that amount yourself (you can work out the exact amount based on your birthday). You can pay the money into your KiwiSaver after your 65th birthday, as long as it is before 30 June 2016. . There is no point in contributing more (unless purely from a savings point of view) as you will not get any more MTC.
Your fund manager puts in a claim for MTC in early July for all members who contribute to them directly. You can also contribute using the tax payment KSS option through internet banking, making sure that you provide your IRD number. Inland Revenue knows which KiwiSaver Scheme you are in and will forward your funds to your provider
Readers should check their KiwiSaver statements every year to make sure that they receive the amount of MTC they are entitled to. Mistakes do occur but they can be put right. You can check back to see how much you received in previous years using your IR login, or ask your fund manager for a statement.
Turning 65 is a big milestone for most KiwiSaver investors. Some fund managers write to their clients before their birthday to let them know how KiwiSaver will change for them. Some investors can’t wait to get their money out, but many are now opting to continue with their savings as it gives them access to a wider range of investments than bank term deposits.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06-8703838 or go to www.peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz.