The first thing to know about member tax credits is that they have nothing to do with tax. They are simply a cash payment from the government, calculated annually and paid into your KiwiSaver account.
Video: Member Tax Credits Explained
What are KiwiSaver Member tax credits, and how do they work?
Despite their confusing name, member tax credits have nothing to do with tax, and they aren’t really that taxing to understand either.
Here’s how they work.
Member tax credit is the name given to the money the government adds to your KiwiSaver account each year, provided you put in money as well of course. So for ease, we will call it the annual government contribution – as that’s really what it is.
So how much can I get?
For every dollar that you put into your KiwiSaver account, the government will put in 50 cents, up to a maximum of $521.43 per KiwiSaver year. Therefore to get the maximum you will have to contribute $1,042.86 a year. But if you were to put in $500 a year, the government would only put in $250.
If the money deducted from your pay is less than $1,042.86, and you want the full government contribution, then you can top up your account with voluntary payments. It doesn’t matter whether you are working or not; as long as someone other than your employer puts money into your account for that KiwiSaver year, the government will also make a contribution.
Who gets this annual government contribution?
If you are in a KiwiSaver scheme, are over 18, live mainly in New Zealand, and are not yet eligible to withdraw from KiwiSaver, then you are eligible to receive member tax credits.
What do you mean by a KiwiSaver year?
Unlike a calendar year, a KiwiSaver year runs from July 1st to June 30th.
Here’s a tricky one. What happens if I join KiwiSaver partway through the KiwiSaver year?
If you only joined partway through a KiwiSaver year, then you won’t be eligible for the full government contribution for that year. The money you are eligible for is based on the number of days of that year you’ve been in KiwiSaver for – so if you joined, or turned 18, on the first of February for example, you would be eligible for 150 days’ worth of government contributions.
Ok, so what do I have to do to get these member tax credits?
If you fit the criteria mentioned before, to receive the annual government contributions you have to put money into your KiwiSaver account – either through the money that gets deducted from your pay, or by putting in voluntary payments. You need to ensure that the money is deposited during the KiwiSaver year. So don’t leave it until the last minute to make your contribution, get your contributions in by 30 June each year.
Your KiwiSaver provider will claim the money from the government for you at the end of the KiwiSaver year, each year usually in July. You will see the money in your account within a month of your KiwiSaver provider making the claim.
The member tax credit isn‘t a gift like the $1,000 kick-start. The maximum member tax credit contribution from the government is $521 per year. It is a 50 cent in the dollar match, so you need to contribute $1,042 (or $20 per week equivalent) to receive the maximum $521. So if you contribute, they contribute. If you don‘t, they don‘t.
There are some exceptions
Minors (those under 18) don‘t get member tax credits -- even if they are working and contributing to KiwiSaver.
If you leave New Zealand to live or work overseas, you will not be eligible for member tax credits while you‘re away, even if you keep on contributing to KiwiSaver. You need to let us know if this applies to you.
When you become eligible to withdraw from KiwiSaver, you can elect to stay in the Scheme and keep contributing, but you will no longer receive member tax credits.
Calculating tax credits
If you‘ve been a KiwiSaver member for more than a year, calculating your member tax credit entitlement is simple. As long as you make a contribution some time between 1 July and 30 June, the government will also make a contribution up to a maximum of $521. Your contributions can be made up from:
Employee contributions (through IRD)
Voluntary contributions (through IRD)
Voluntary contributions made directly to GMK by cheque and direct debit.
It won‘t matter if your payments are regular or lump sums. The amount does matter though; if you only put in $1,000, you‘ll only get $500. If you put in $1,042 you will get the maximum amount of $521 from the government.
You can make top-up payments directly to GMK by cheque.
Joining KiwiSaver part way through the year
In your first year as a KiwiSaver member, the member tax credit is calculated a little differently. The maximum member tax credit you are eligible to receive in your first year is determined by which part of the KiwiSaver year (1 July to 30 June) you join or start contributing and the amount you contribute.
Unlike subsequent years, a lump sum of $1,042 in your first year won't guarantee you the maximum member tax credit.
If you contributed in the first month you joined KiwiSaver your entitlement begins from the beginning of that month. Otherwise, your entitlement will begin from the exact day that you join KiwiSaver.
If you turn 18 partway through a year, your entitlement will be based on the number of days in the year you were 18.
How do you know how much you've contributed and how much you‘re eligible for?
If you make all your contributions directly to GMK via direct debit authority or cheque, you can log on to your account and check your contributions report to see how much you‘ve contributed.
If you make any contributions through your workplace, or via IRD, you should confirm how much you‘ve contributed by reviewing your payslips, or contacting IRD (0800 549 472). Please note that the dates on your Gareth Morgan KiwiSaver Scheme Contributions Reports for these payments refer to when GMK receives your payments, not when deductions were taken or your payments were made to IRD, so they will not be useful for calculating your member tax credit eligibility.
When will I see my money? It won't happen overnight, but it will happen.
We claim member tax credits in July of each year. Generally the turnaround between us submitting a claim to IRD and you seeing the money in your account will be about two weeks. Sometimes your member tax credits may be paid in stages as IRD process additional contributions for the KiwiSaver year after the member tax credit claim was made.
If you have any questions please call us on 0800 GARETH (427384)