Site Designed By Airnet
Absent KiwiSavers can’t gain member tax credits
 
Q.        My son aged 20 is taking on a short term job in Napier but is planning to go overseas on an extended working holiday later in the year. Should he join KiwiSaver? Can we top up his KiwiSaver account each year while he is overseas so that he can get $541 in Member Tax Credits?
 
A.         If your son is eligible to join KiwiSaver then he should be automatically enrolled with his new job. He can expect his employer to give him information on KiwiSaver within the first 7 days and deductions should start from his first pay cheque (even if he plans to opt out – the deductions will be refunded in due course). There are a few exceptions to automatic enrolment such as casual agricultural workers or if it is a temporary job for less than 28 days. These workers are not automatically enrolled, but they can opt in by filling in a KS2 form and giving it to their employer.
 
What are the rules of eligibility? You are eligible to join KiwiSaver if you are under the age of 65, are currently living here and entitled to live here indefinitely (that includes Australians and anyone with permanent residence). It does not include New Zealanders here on holiday who are normally living elsewhere (unless they are State Services employees seconded to work abroad).
 
Your son can choose his own Scheme by signing up with a fund manager or he will go into a default Scheme or a Scheme chosen by his employer if they have a ‘preferred provider’. 
 
He will receive the $1000 ‘kick start’ from the Government and as long as he is living and working in New Zealand he will be entitled to Member Tax Credits (up to $521 per year, paid in July each year). If he joins this month then his Member Tax Credits will be calculated pro rata – around $80 for the year ending 30 June 2013 (it works out to about $10 per week, provided he is contributing at least $20 per week). 
 
As to your idea of continuing his contributions if and when he goes overseas, sorry, but as soon as he leaves the country he will no longer be entitled to Member Tax Credits. It is up to fund managers to determine whether their members are entitled to receive MTC each year. Usually when someone goes overseas they will notify the fund manager of their change of address, but in many cases young people will simply use their parents’ address and the fund manager may be none the wiser. 
 
I have heard of people who continue to contribute to their KiwiSaver from abroad in order to receive $521 in MTC each year, but eventually Inland Revenue catches up with them. When an application for full withdrawal is made (and that is only at age 65, or in cases of serious illness or death) the person has to declare any periods when they were not living in New Zealand and sign under oath that the information is true and correct. Any MTC wrongfully paid out will be deducted before the funds are paid out. 
 
If your son does go overseas he can leave his KiwiSaver to grow here for as long as he likes or (after one year) he can apply to have it paid out (but he will lose all MTC). Plans are afoot to allow full transfers (including MTC) to a qualifying Australian super scheme, and this should be in place later this year.
 
 
Shelley Hanna is an Authorised Financial Adviser FSP12241.  Her disclosure statement is available on request and free of charge by calling 8703838.  The information contained in this article is of a general nature and is not intended to provide personalised advice.  If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.