NZ Herald 30 July 2016

AI suspect some people miss out on this money because they think taxes are too complicated or depressing, and maybe they don’t want to go anywhere near Inland Revenue’s website. That’s a pity. The website is pretty user friendly, and tax refunds are low hanging fruit.

There are companies out there that check if you are due a refund, in exchange for a fee or part of the refund. But it’s easy enough to do it yourself and keep all the money.

Before we all get too excited, though, note that Inland Revenue says, “Most beneficiaries, salary and wage earners will have paid the right amount of tax and won’t be eligible for a refund.”

It adds, “You’re most likely to get a refund if you:

• Worked for part of the year.
• Received a lump sum payment (such as a bonus or redundancy)
• Had more than one employer during the year
• Have expenses to claim
• Were entitled to the independent earner tax credit but didn’t claim all of it during the tax year.”

For more information, go to tinyurl.com/NZrefund. That page refers to various tools and calculators, which are listed on the right side of the page.

In Step 2 on the page, it says that if you are due a refund you should request a Personal Tax Summary (PTS). But if you find that instead you owe tax, you should not request a PTS and you won’t have to pay the tax.

Take note of the “Note” on that page. If you owe tax and go ahead and request a PTS anyway, “you may end up with a tax bill that you will have to pay.”

At what time of year should you do this? Says an Inland Revenue spokesman, “You can do the calculation for any previous income tax year at any time, but for the current year, 1 April 2016 to 31 March 2017, you will have to wait until after the income tax year is over, so after March 2017. This is because it’s worked out on your yearly income.”

All this arises from the fact that most New Zealanders don’t have to file a tax return. The system is set up so that the right amount of tax is usually taken out of people’s income before they get it.

As Fred Dagg once told us, we don’t know how lucky we are. When I lived in the US and Australia, pretty much everyone who earned income had to fill out a long tax return. What a drag it was.

AYour share of your ex’s super scheme, plus your savings, should give you a good deposit for at least a modest home at retirement. But let’s try to make it happen sooner.

It’s going to take determination, but it sounds as if you’ve got that. Joining KiwiSaver was a great first step.

Obviously, if you can switch to full-time work as soon as possible, or take another part-time job, that would really help you build up a deposit.

But saving more isn’t only about earning more. There are two other powerful factors in how much people save: attitude and habit.

If you tell yourself you can save, and set things up so you make a habit of doing so, you will save. I’ve had letters from people on really low incomes who save astonishing amounts. Some tips:

• Pay yourself first. Set up an automatic transfer into your KiwiSaver account every pay day, over and above the contributions already coming out of your pay. Start with just a small amount — maybe $10 or $20. Your KiwiSaver provider should make this easy to set up. If they don’t, get back to me.
• After a while, imagine you’ve lost your job and your new job pays 5 per cent less. You would manage because you would have to. So increase the automatic transfer by 5 per cent of your pay.
• Too hard? Start with 1 or 2 per cent and gradually raise it.
• Promise yourself that every time you get a pay rise — in your current job or when you start a new job — you’ll add half the extra money to your regular savings.

But hang on a minute. Won’t putting extra money into KiwiSaver tie it up until retirement?

Probably not. Many people don’t realise that the KiwiSaver first-home withdrawal and Home Start Grant can also help “second chancers” — previous homeowners who no longer own a home. And you seem to be a perfect candidate.

To be eligible, you have to be in KiwiSaver for at least three years, and you can’t have already received a KiwiSaver first home withdrawal. Also:

• The usual house price caps apply. The house you buy must cost less than: $550,000 in Auckland; $450,000 in Western Bay of Plenty, Tauranga, Hamilton, Kapiti Coast, Porirua, Upper Hutt, Lower Hutt, Wellington, Nelson, Tasman, Waimakariri, Christchurch, Selwyn and Queenstown; or $350,000 elsewhere.
• As a second chancer, your “realizable” assets must be less than 20 per cent of the house price cap in your area. That’s less than $110,000 in Auckland, $90,000 in that long list of places, or $70,000 elsewhere.

In this context, “realizable” assets include savings and investments, boats or caravans worth more than $5000, vehicles other than your main car, and other assets worth more than $5000.

There used to be a maximum income for second chancers, but that was dropped on July 1. Says Housing Minister Nick Smith, “This change will help many thousands of mid-life, middle-income New Zealanders who have been through a separation or business failure and are struggling to get back into home ownership by enabling them to access their KiwiSaver funds.”

If you’re eligible, you will be able to withdraw all your KiwiSaver money except $1000 to use as a home deposit.

You will also get a Home Start Grant of $3000 if you’ve been contributing to KiwiSaver three years, ranging up to $5000 if you’ve been in five years or more. Double those numbers if you buy a newly built house. Imagine getting $10,000 from the government!

Two more rules: you need a deposit of at least 10 per cent of the house price — but that can include your KiwiSaver withdrawal and Home Start Grant. And you have to live in the house for at least six months. For more info, see the Housing NZ website, www.hnzc.co.nz.

So there’s your goal: a 10 per cent deposit. Perhaps set yourself a savings amount each year, heading for that goal.

If you’re in Auckland, it’s not easy to find a house in a reasonable neighbourhood for less than the maximum $550,000. But prices could well fall, or that maximum rise. I suggest you go full steam ahead with your savings plan anyway, and see what happens over the next few years.

One way or another, I reckon you can do it! If you have to take on a big mortgage, look forward to receiving part of your ex’s super to partially or fully pay it off.

AData certainly have been compiled — and they can put your mind at rest.

Starting with the really young, 4328 KiwiSaver members between 18 and 24 have withdrawn KiwiSaver money to buy their first home since the withdrawals began in July 2010, says Inland Revenue. Of those, 10 per cent are now on contributions holidays.

If you define “young” as 40 and under, 54,752 have withdrawn money. Of those, 11 per cent are on contributions holidays.

The vast majority keep participating. And the ones on holiday may be out for just a short time. So this doesn’t seem to be a big worry.

To get the first home help, you have to be in KiwiSaver for at least three years. So I suspect these people have developed a savings habit and watched how the tax credits and employer contributions boost their savings. They’re motivated to continue.

On your comment about KiwiSaver being set up to fund people’s retirement, the fact that some members use it to buy a home doesn’t bother me for two reasons:

• Asking the young to sacrifice spending money now to save for retirement — sometime in the distant future — is unrealistic. But a first home is a goal they can visualise.
• For most New Zealanders, a secure retirement means having a mortgage-free home plus savings. Helping people towards either of those goals seems to be of equal value.

You only have to consider how helpful this feature of KiwiSaver will probably be for our previous correspondent to support the idea.