In the most significant development for New Zealand savings and superannuation in decades, the KiwiSaver Act 2006 was passed last year. Some believe that this is the first step in the direction of Australia's much vaunted compulsory superannuation.
A frenzy of activity is going on to establish KiwiSaver in time for the proposed 1 July 2007 start date. This particularly involves the IRD (which will act as a conduit for KiwiSaver contributions) and participants in the savings and investment industry (who will establish KiwiSaver schemes).
KiwiSaver will affect all employers. All new employees from 1 July 2007 will be enrolled in a KiwiSaver scheme unless they choose to "opt-out". At a minimum, employers will need to provide all new employees with a KiwiSaver information package. Employers will also need to deduct KiwiSaver contributions from the salary or wages of participating employees (at a minimum rate of 4%) and pass these contributions on to the IRD for payment into the relevant KiwiSaver scheme.
Employers may choose to become more involved. For example, they can select a KiwiSaver scheme for their employees and customise its terms. Employers may also wish to make use of the tax advantage provided by KiwiSaver, allowing them to pay up to 4% of an employee's salary to a KiwiSaver scheme tax free.
Employers have a number of choices to make in relation to KiwiSaver and information about it is beginning to flow from Government and savings industry participants.
We recommend that employers give early consideration to their KiwiSaver strategy.
For more information on any of the cases, articles and features in Commercial Quarterly, please email Diane Graham or call her on 64 9 916 8849.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.