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How Can I Get The Maximum Tax Credit Benefit From KiwiSaver?

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Contributor:
Mary Holm
Mary Holm

Question:

In February I started a new job and was automatically enrolled in KiwiSaver. About $200 has been deducted, but unfortunately I did not enjoy the job and have left.

Assuming I cannot find another job in the next few months, I believe I can top up my contributions to receive a matching member tax credit from the government.

I understand that the KiwiSaver year runs from July 1 to June 30 and that if I top it up, it is on a pro-rata basis. Can you tell me what amount I could pay in before June 30 to get the maximum benefit for this first part-year?

Also, in March my partner joined KiwiSaver and she will contribute about $500 before June 30. Is she able to top up this amount and would it be worthwhile to do so?

Answer:

Mary Holm: The next couple of months is top-up time for many KiwiSavers who don't expect to have contributed at least $1043 to their KiwiSaver accounts between July 1 2008 and June 30 this year.

For those who joined KiwiSaver before last July 1, the situation is straightforward.

It's a great idea to increase your contributions before June 30 until they reach $1043.

For every dollar up to $1043, the Government will make a matching contribution, so your input is doubled. And twice as much going in means twice as much in retirement.

For newer KiwiSavers _ such as you and your partner - it's a bit more complicated. The maximum tax credit in your first year is proportionate to how much of the July-June year you have been a member.

Generally, it is worked out from the first day of the month you joined. So if you signed up halfway through the KiwiSaver year, in January, your maximum tax credit will be half of $1043, or about $523.

In your case, you've belonged to KiwiSaver for five out of 12 months.  Five-twelfths of $1043 is $435. You've already contributed $200, so put in $235 more before June 30. I suggest you do it by mid-June, just to make sure it is processed by the end of the month.

For your partner, the maximum tax credit this year is four-twelfths of $1043, which is $348. Given that she will already have contributed $500, she won't gain anything extra by contributing more - unless she simply wants to tie up more savings in KiwiSaver.

 

Mary Holm is the author of bestselling books on KiwiSaver and personal finance. She is also a highly praised seminar presenter. Her written advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following that advice.     

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