Q&As
- Reader dislikes “user pays” attitude and has a message for last week’s self-proclaimed bigot
- Volunteers sought for overseas work and adventure
- Why young person who has moved to Australia might want to keep contributing to KiwiSaver
- Rules flexible for overseas KiwiSavers wanting to return to NZ to buy a first home
- A bank seems to be listening
QAs a sixth generation ethnic Pakeha New Zealander, I am annoyed and disturbed by the rise of a selfish “user pays” attitude to healthcare, etc, imported here from the USA.
New Zealand has a proud tradition of looking after all of its citizens. I am happy to pay my taxes as this is the kind of decent society I want to live in, not one in which the unfortunate go without good medical care or beg in the street.
Your yoga-practising “bigot” correspondent last week would do better to help educate those who make poor health choices, rather than rail against the Kiwi ethos of social responsibility. We are all in this together.
AWhile last week’s correspondent said he was American-born, I’m not sure the “user pays” concept came from there. Regardless, the idea sometimes works well — especially when the users of a particular service tend to be well off.
But I fully agree with your main point — that one of New Zealand’s great strengths is that we give practically every person basic support. A lot of New Zealanders struggle, but at least nearly everyone has a roof over their head and, as you say, medical care.
And yes, last week’s self-proclaimed bigot might cheer up if he joined the brigade of retired New Zealanders helping others, as lauded in this column two weeks ago. While we’re on that topic, read on.
QI would like to expand on your article about the grey heads to include enthusiastic volunteers of all ages who give up their time for volunteer work.
Habitat for Humanity has volunteers ranging in age from 18 to 85 going overseas to build houses for families in need. I am the Habitat Family Services Administrator in Auckland, leading a team to Bangladesh in December with three other leaders, and we are looking for 70 New Zealand volunteers, without any particular building skills, to build 20 houses over five days in Bangladesh for 20 families in need.
The volunteers will be giving time and money. It will cost them $4,900, to pay for airfares, accommodation, food and a donation.
Volunteers come with a sense of adventure and a humanitarian heart; they leave having transformed the lives of the local Bangladesh people and having received as much as they gave.
Habitat could not provide this service without the volunteer’s exceptional support. Isn’t it great that our young people are also willing to give? You can contact me at Habitat, Jane Mead phone 271-3357.
AAgainst my better judgment I’m running your letter! If every charity leapt in to promote its good works, that would fill the column for weeks — and drift a long way from the personal finance theme. So we won’t do that.
But I’ve heard excellent things about Habitat for Humanity, so good luck with getting the team together. Perhaps our bigot could sign up?
QI recently moved to Australia and stopped contributions to my KiwiSaver account (previously made via my NZ employer). Can I still contribute the minimum amount each year and claim the government tax credit?
It sounds like double dipping, given that I now receive Australian Super, but it does seem like a good idea if it’s allowed. It may be a small amount each year, but you know what they say about compound interest! P.S. I’m 26.
ANo harm in asking. But while you can still contribute any amount to KiwiSaver, you’re no longer eligible for the tax credit because you don’t live in New Zealand.
However, if you’ve never owned a home and you’re likely to return to New Zealand to buy your first home, there’s a really good reason to keep contributing.
To my surprise, Housing New Zealand, which runs the KiwiSaver first home subsidy, says people living overseas can count that time towards their three years in KiwiSaver to qualify for first home assistance.
The assistance takes two forms:
- After three years in the scheme, you can withdraw all your contributions, employer contributions, and all returns earned in your account to use as part of your first home deposit. There are no income or house price restrictions on this.
- If you contribute at least 2 per cent of your income (4 per cent before April 2009), you may qualify for a deposit subsidy of $3000 after three years, $4000 after four years, or $5000 after five or more years. A couple can get up to $5000 each if both qualify.
To get the subsidy, your household income in the 12 months before you apply has to be $100,000 or less for one or two homebuyers, or $140,000 or less for three buyers. And your house has to cost $300,000 or less or, if it’s in Auckland, Wellington or Queenstown Lakes District, $400,000 or less.
For more info, see last week’s column and tinyurl.com/kiwisaverfirsthome.
Being overseas should make no difference to qualifying for the withdrawal, says Housing NZ. However, a spokesperson adds, “It is best that you check and discuss this with your KiwiSaver scheme provider.”
What about the subsidy?
“We have taken the stance that for KiwiSaver members working overseas, they need to contribute 4 per cent or 2 per cent, depending on the periods they were overseas, of the adult minimum wage to meet the contribution criteria,” says a spokesperson.
“For example, if a client was working in the UK from April 2008 to March 2009, they would need to contribute 4 per cent of the adult minimum wage, to maintain their contribution level. They can do this in a voluntary lump sum payment. In this case, they would need to contribute $998.40.
“We do not take into consideration income earned overseas because it would be too complicated to administer, and there can be no automatic deductions taken from the individual’s income and paid towards their KiwiSaver account. However, if they wanted to contribute at a higher rate than the adult minimum wage, then this should result in having a larger amount to withdraw to purchase their first home, or to assist with their retirement.”
The following should help KiwiSavers overseas as well as New Zealand residents who don’t earn an income, whose minimum contribution level for the first home subsidy is also 4 or 2 per cent of the adult minimum wage. Here’s what that amounts to (rounding the dollars up):
For the year ending March 2008, $936; up to March 2009, $999; up to March 2010, $520; up to March 2011, $531; up to March 2012, $541. And for the year ending March 2013, $562.
“More than likely (the minimum contribution) will be increased to 3 per cent from 1 April next year,” says the spokesperson. That’s because the employee minimum contribution to KiwiSaver rises to 3 per cent at that time. We don’t know yet what the minimum wage will be then, but 3 per cent of it will probably be between $850 and $900.
Where does that leave our correspondent? As you say, compounding of small amounts can add up. If you can get at least $562 into your account this year, and keep up with the required amounts in later years, it could make quite a difference if you buy a house in New Zealand later on.
And if you don’t end up doing that, you’ve got more for retirement.
QThis may be a contentious one, but there are a lot of Kiwis in my position.
My wife and I struggled on, earning close to but less than the $100,000 couple limit to be able to withdraw our KiwiSaver contributions and get subsidies to buy a house. Unfortunately, realising we were making slow progress we moved to Aussie, and although working in testing conditions we are able to power save. We hope to return to New Zealand within the next two years to start a family and buy a house.
After both contributing to KiwiSaver since inception — with the ultimate aim of using the home deposit features — we would have a significant amount of money available to us. But we are currently earning in excess of $Australian 100,000. We expect to earn less than $100,000 when we return to New Zealand.
Does money earned overseas get used to calculate whether the income earned was under $100,000? And if so would we need to work back in New Zealand, ensuring we earn less for a year, to be eligible to withdraw the money?
AWithdrawal is not a problem. Anyone on any income can withdraw KiwiSaver money after three years to buy a first home.
The rules are tighter around getting the first home subsidy, but your prospects look good.
Firstly, as stated above, you can count the years you are overseas towards the three to five years you need to be in KiwiSaver to get the first home subsidy, as long as you meet the minimum contribution levels. You might want to start making contributions if you are not already.
Secondly, as I explained last week, it’s okay to earn more than $100,000 during the three to five years. What matters is that you earn less than that in the 12 months before you apply for the subsidy.
And for you and others overseas, we should change that to “…earn less than that in New Zealand in the 12 months…”
Says a Housing NZ spokesperson, “As far as income is concerned, all we would want to see is evidence from IRD of what your income was for the last 12 months. Clearly, if someone was working overseas for the bulk of that period then the IRD statement would only show New Zealand earnings and that would potentially be considerably less than $100,000.”
It seems, therefore, that even if your annual salary is more than $100,000 once you are back in New Zealand, you may still be eligible for the subsidy if you apply less than a year after returning here.
I’m sure that’s not what the designers of KiwiSaver intended. But there you have it — although you may not want to count on that detail lasting forever. In your case, though, you expect to earn less than $100,000 back here anyway, so it’s not a problem.
By the way, I like your “power save” wording.
QI have just logged into my Westpac account and noted that the bank has changed its notation on the super payment from “welfare” to “govt payment”. Maybe someone has been reading your column and observed that “welfare” was not welcome.
APerhaps so. Oh, the Power of the Press!
No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.
Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.