Source: Radio New Zealand
RNZ’s money correspondent Susan Edmunds answers your questions. RNZ
Got questions? RNZ has a new podcast, No Stupid Questions, with Susan Edmunds.
We’d love to hear more of your questions about money and the economy. You can send through written questions, like these ones, but – even better – you can drop us a voice memo to our email questions@rnz.co.nz
I have a question that has always bothered me, and I’m yet to get a satisfactory answer. Why do we pay tax on our pension when it is coming from the tax that we have already paid? I was always of the understanding that you can’t be taxed twice. After all, isn’t that double dipping?
There are two parts to my answer.
The first is that I think a lot of people have the idea that they paid tax into a pool through their working lives, from which they will be paid the pension when they retire.
That isn’t the case – pensions are paid by people who are paying tax now, as part of general government expenditure.
The second part of it basically comes down to why we pay tax on benefits at all.
Tax is paid on all income earned in New Zealand, even when it is money that comes from the government.
Although it’s essential an administrative exercise for benefits, the money you receive is calculated a gross payment and then the tax you pay is determined according to your individual situation and the current rules.
In the case of NZ Super, if you’re working and claiming the benefit, for example, you could end up with a higher marginal tax rate on your pension because your overall income is higher.
There are some people who are argue that it should be a taxfree grant but that’s potentially a separate conversation!
How do I check how much is in my KiwiSaver? And how can I increase the amount of contributions from my pay? Does my company have to match that amount to what I increase to?
You can check your KiwiSaver balance any time through your KiwiSaver provider. Most have an online platform to do this, or you could give them a call to find out what options are available. If you don’t know who your provider is, Inland Revenue can tell you.
You can change your contribution rate through IRD’s myIR system, by contacting your KiwiSaver provider or by giving your employer notice.
Your employer usually only needs to match your contribution at the default rate (currently 3 percent but slowly increasing to 4 percent by 2028). So if you contribute more than that, they might not need to. Some employers are willing to match higher amounts, though.
Can you please advise if there is a ceiling on how much you can get before the pension would be affected? ie… if a family member were to put into our bank $1000 per week would this affect the pension?
No there’s no ceiling. Other amounts could mean you can’t access things like the accommodation supplement, and you could end up on a higher marginal tax rate depending on where the money is coming from but there is no income test for KiwiSaver.
What if I retire aboard a yacht, with no residence in country with reciprocal agreements?
If you are going to be overseas for more than six months, you need to apply to MSD if you want to keep your pension going.
You will need to do this at least six weeks before you leave New Zealand. If you haven’t notified MSD and you are away more than six months, they may ask for the sum to be returned.
What you can get if you are eligible for New Zealand Superannuation but living overseas depends on the country that you’re going to live in. Some countries like Australia have reciprocal agreements with New Zealand which means that applications for New Zealand Superannuation can be made while you are resident in that country and NZ residence can count for pension eligibility in the agreement country.
MSD advises that if you’re going to a country that doesn’t have a reciprocal agreement with New Zealand, you might be able to get your pension. The amount you receive would depend on the number of months you’ve lived in New Zealand between the ages of 20 and 65.
The best thing to do in this case will be to get in touch with MSD well before you leave to find out how the rules apply to your case.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
