Have you heard of the member tax credit? If you haven’t, you’re not alone. But unfortunately that means you might be missing out on free money from the government.
Free. Money. No joke.
Despite its name, it doesn’t actually have to do with tax. It is the annual government contribution to your KiwiSaver account. In plain terms, it is money the government puts into your KiwiSaver, every year, tax-free, no strings attached - if you qualify.
In a survey from 2017, almost half of KiwiSaver members had not heard of the member tax credit. And when it was explained, a quarter of them STILL didn’t understand it. The previous year, 62% of people who didn’t receive the full amount said they would have been more likely to save enough if they had known.
We just can’t sit around and see all those Kiwis missing out on free money. As always, BetterSaver is here to make it easy. So let’s get to it and make sure you’re in the loop to get the maximum government contribution into your KiwiSaver.
How much money are we talking about?
The government will contribute 50 cents for every dollar you put in up to a maximum of $521.43. So as long as you contribute $1042.86 every year, you will receive the full amount.
If your contributions add up to less than $1043 (we’re rounding to keep this simple), you’ll still get 50% of every dollar you put in. So, if you contribute $500, the government will contribute $250. But we want to help you make sure you get the most possible out of a sure thing. It’s essentially a 50% return on every dollar up to $1043!
Do I qualify?
There are some qualifications you have to meet to get the government contribution.
- Be a KiwiSaver member
- Be over 18 years of age
- Live mainly in New Zealand
- Not be eligible to withdraw your KiwiSaver for retirement (for most people, that’s usually age 65)
It doesn’t matter if you are employed, self-employed or not working - as long as you contribute to your KiwiSaver account.
How do I know if I’m contributing enough?
The magic number is $1043, in a KiwiSaver year. Here’s how to make sure you hit it.
Check your payslip
If you are employed and have KiwiSaver contributions taken out of your pay, check your payslip. If your weekly contribution is at least $20.05, you’re sweet as. If not, you should add some voluntary payments so you don’t miss out on free money. Your employer contributions don’t count toward the member tax credit - only your personal contributions.
Check your contribution rate
You can choose to contribute 3%, 4%, 6%, 8% or 10% of your wages to your KiwiSaver fund. Every 1% can make a big difference. Here’s a couple examples to put things in perspective.
- If your annual pay is $34,762 a year or more, and you contribute at the rate of 3%, you’ll get the maximum government contribution.
- If you make at least $26,072 and contribute 4%, you’ll also get the maximum contribution.
A small change in your contribution rate can make the difference between getting the maximum member tax credit or not, and hopefully you will hardly notice the small difference in your pay. Your contribution rate makes a massive difference, particularly later in life when you want to use your KiwiSaver funds. The money you put in your KiwiSaver compounds over time, so what you put in now can mean a difference of tens of thousands of dollars to how much you end up with later.
What if I am not employed?
If you are self-employed or unemployed, just make sure you put at least $20 a week in your KiwiSaver account. Simple!
How will the money get into my account?
Your provider will get the money from the government and put it into your account for you. This usually happens in July/August. Then it will be invested along with the rest of your KiwiSaver fund. Literally all you have to do is contribute! The rest happens automatically.
One more thing…
You have to contribute the minimum $1042.86 in a KiwiSaver year.
What’s that, you ask? It doesn’t line up with a calendar year - it’s a financial year that runs from July 1 to June 30. So that means June 30 is the DEADLINE for getting your contributions in to get the full government contribution. Actually, do it a little earlier in case it takes time to process.
Get your free money
In 2016, 1.1 million KiwiSaver members did not get the full member tax credit. Over half of those members didn’t receive any tax credit at all, because they didn’t contribute anything to their KiwiSaver.
We hate the fact that people are unknowingly missing out on tax-free money from the government, especially when it is so easy to get. Those contributions can really help whether you’re looking to buy your first home or save for retirement.
Having basic knowledge about KiwiSaver can make a major difference to your financial life later. That’s why we are committed to making sure everyone has access to unbiased advice to get the most out of their KiwiSaver and generally be better off financially. KiwiSaver can be confusing but we are here to make it simple.
Are you in the best KiwiSaver fund for you? Take our fund finder quiz to find out and start being a better saver in just five minutes.