The Government has announced changes to Kiwisaver, Working for Families and student loans as part of Budget 2011.
The changes introduced by the new legislation principally involve a reduction to the Government's tax credit contribution to KiwiSaver and a decrease in the amounts of Working for Families tax credits for people on higher incomes over time.
- The member tax credit (MTC) is to be halved for the next MTC year (year ending 30 June 2012). The Government will now contribute 50c for each $1 contributed by individual KiwiSaver members, up to a maximum of $521.43 per year.
- All employer contributions to employees' KiwiSaver accounts (and complying superannuation funds) will be subject to employer superannuation contribution tax (ESCT) from 1 April 2012. ESCT will be applied at a rate equivalent to an employee's marginal tax rate.
The Government also announced changes to employee and employer contribution rates which will be included in a bill to be introduced later this year:
- The minimum employee contribution rate will rise from 2% to 3% for all members, new and existing, from 1 April 2013. The default contribution rate for new employees who do not select a rate will also be 3% from that date.
- Compulsory employer contributions will rise from 2% to 3% from 1 April 2013.
Working for Families changes - these are effective from 1 April 2012
- The abatement rate will increase by 1.25 cents at every inflation adjustment round from 1 April 2012 until it reaches 25 cents in the dollar.
- The current abatement threshold of $36,827 will be lowered by $477 to $36,350 on 1 April 2012 and then reduced by $450 at every subsequent inflation adjustment round until it reaches $35,000.
- The inflation adjustment for family tax credit amounts for children 16 and over will be removed from 1 April 2012 until the amounts for younger children catch up. All family tax credit amounts will then be adjusted for inflation.
Student loan changes
The Government also announced changes to student loans which will be included in a bill to be introduced later this year, and implemented over the next two years. The following changes may relate to those who have a student loan.
- Shortening the repayment holiday for overseas-based borrowers to one year and requiring borrowers to apply for a repayment holiday for those leaving New Zealand from 1 April 2012
- No longer adding back losses to income for student loan repayment purposes from 1 April 2012
- Requiring a contact person for all new loan applications for study from 1 January 2013
- Restricting student loan eligibility for those with an overdue repayment obligation of $500, which has been overdue for a year or more, affecting new lending from 7 February 2013
- Holding the repayment threshold to $19,084 until 31 March 2015.
Find out more about the Budget changes
Date published: 25 May 2011
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