Questions we've been asked: General issues

Kiwisaver - creditable membership
Issued July 2008

Answers to some questions we've received on "creditable membership" and eligibility for the member tax credit.

Question

What does the word "membership" in paragraph (a) of the definition of "creditable membership" in section YA 1 of the Income Tax Act 2007 mean?

Answer

As this has caused confusion, Inland Revenue has recently clarified its view that "membership" in paragraph (a) of the definition of "creditable membership" commences from the earlier of an account being opened by a provider for a member (in anticipation of securities being allotted) or securities allotting.

This interpretation will not change the position for members who are automatically enrolled into KiwiSaver - their creditable membership will commence in accordance with paragraph (b)(i) of the definition (as deductions will usually commence prior to their account being opened). This will mean however that for members who contract directly via a provider, their MTC eligibility will generally commence from when their provider opens up an account for them as opposed to when funds are first transferred to the provider.

Consider the following example:

• Joe opts to join KiwiSaver via a provider on 5 January 2008 who opens an account for him. Joe makes no contributions at this time.
• On 5 April 2008 Joe's $1,000 kick-start contribution is paid to his provider.
• On 15 June 2008 Joe makes his first contribution of $3,000 to his provider.

Given Inland Revenue's interpretation of "membership" commencing from the date on which an account is opened for a member, Joe's eligibility for the member tax credit will commence from 5 January 2008. However, if Joe's provider had not opened an account for him in January, his eligibility for the member tax credit would have occurred (under paragraph (b)(ii) of the definition of "creditable membership") from 1 April (the first of the month in which his $1,000 kick-start contribution was paid to his provider and thus an account opened).

Question

What does Inland Revenue's clarification of the word "membership" mean for members who joined KiwiSaver via a provider during the transitional period (1July 2007 to 30 September 2007) and made a contribution prior to 31 October 2007?

Answer

This interpretation has no impact on members who joined KiwiSaver during the transitional period and made a contribution prior to 31 October 2007. These members fall within the paragraph (b)(iii) of the definition of "creditable membership". Accordingly, their eligibility for the member tax credit will commence from the earlier of:

• the first of the month in which their KiwiSaver provider received a valid application for KiwiSaver membership from them, or
• the first of the month in which their first contribution to KiwiSaver was received by their scheme provider or Inland Revenue.
  
  

Question

What does Inland Revenue's clarification of the word "membership" mean for members who joined KiwiSaver via a provider during the transitional period (1July 2007 to 30 September 2007) but did not make their first contribution until after 31October 2007?

Answer 

The eligibility for the member tax credit for these members will commence from the earlier of:

• the actual day that their KiwiSaver provider opened up an account for them, or
• the first of the month in which their first contribution to KiwiSaver was received by their scheme provider or Inland Revenue.

Other pages in: General issues

• QB 12/11: Income tax - look-through companies, rental properties and avoidance
• QB 12/10: Do the historic depreciation rates continue to apply to grandparented structures acquired before 1 April 2005?
• QB 12/09: Income tax - look-through companies: interest deductibility where funds are borrowed to make a payment to shareholders to reflect an asset revaluation
• QB 12/08: Income tax - look-through companies: interest deductibility on funds borrowed to repay shareholder current accounts
• QB 12/04: Income tax - deductibility of expenditure on widening or metalling a farm acess road or track
• QB 12/03: Income tax - deductibility of expenditure on cattle stops
• QB 12/05: Income tax - deductibility of expenditure on stock yards
• QB 12/02: Income tax - Treatment of quad bikes for depreciation purposes
• QB 12/01: Income tax - deductibility of expenditure on replacing and extending an inlet race to a dairy shed
• QB 11/03: Income tax - look through companies and interest deductibility
• QB 11/02: Deductibility of expenditure incurred by bloodstock breeders in respect of horses that they race
• QB 11/01: Residential investment property or properties in Australia owned by New Zealand resident - NRWT treatment of interest paid to Australian financial institution
• QB 09/06: GST - Apportionment of the cost of bare land for the purposes of a change-in-use adjustment
• QB 10/06: Elections for qualifying company status
• QB 10/01: Reimbursing shareholder-employees for motor vehicle expenses and the use of the Commissioner's mileage rate
• Are tax sparing disclosures still required?
• QB 09/05: Residential investment property or properties in Australia owned by New Zealand resident - NRWT treatment of interest paid to Australian financial institution
• QB 09/03: Decisions on application of CA 1(2) - common law interest and income under ordinary concepts
• QB 09/02: Holiday houses - income tax treatment
• QB 09/01: Payments made in addition to financial redress under Treaty of Waitangi settlements - income tax treatment
• QB 08/04: Income Tax Act 2007: research and development credits (subpart LH) - tax avoidance (section BG1)
• QB 08/03: Application for a private ruling or product ruling on an issue dealt with in a mutual agreement made under a Double Tax Agreement - Tax Administration Act 1994, sections 91E(4)(D)(ii) and 91F(4)(D)
• QB 08/02: Commissioner's power to issue a replacement ruling that operates retrospectively
• QB 08/01: Tax Administration Act 1994 - Section 91E(4)(f) and self-assessment
• QB 07/05 - Ability to rule where the Commissioner is auditing or investigating - whether the Commissioner has a discretion to rule or is prohibited
• QB 07/02 - Whether The Minor Beneficiary Rule Exemption In Section HH 3B Applies On A $1,000 "Per Beneficiary" Or On A $1,000 "Per Beneficiary Per Trust" Basis.
• Tax treatment of wooden scaffolding planks
• Exemption from gift duty for dispositions of property made by or under an order of the Court: section 75(A) Estate and Gift Duties Act 1968
• Private and product binding rulings - to whom do they apply?
• Bankrupt's ability to carry forward accumulated losses
• Records for controlled foreign companies or foreign investment funds to be available in English
• Website expenditure - deductibility
• Qualifying foreign private annuity exemption from the Foreign Investment Fund regime
• Tourism service providers' payments made to tour guides or drivers - the income tax liability of those parties and the tour operator employing the guide or driver
• Managing communications associated with a dispute referred to the Adjudication Unit
• When does derivation occur in relation to land sales with a deferred settlement, by business taxpayers who provide vendor finance?
• Section 108 Tax Administration Act 1994 (TAA) - commencement of four year statutory period (November 2002)

Date published: 13 Aug 2008

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