NZ Herald 7 July 2012

AInland Revenue ticks most of what you say — although it does have a quibble with the idea that parents can claim their school fees back the next week. They can make the claim the next week, but it will take a bit longer to get their hands on the cash.

“Most IR526 claims will be processed within three to six weeks unless we are waiting on further information eg: IR3 return, bank account number,” says an Inland Revenue spokesperson.

She adds, “Please note for IR3 customers, they must complete their IR3 return before filing their claim. For some IR3 filers there could be delays for the tax credit refund if their IR3 for the same year as the claim has not been filed. A letter will be sent to the customer/agent advising of this.”

When it comes to getting the claim form, “We recommend customers go to our website www.ird.govt.nz/tax 2012 to download the form, or ring if they do not have internet access” says the spokesperson.

In response to your postscript, “There is no time bar on first claims from 2000, as long as customers have the receipts.”

Inland Revenue processes about 300,000 tax credit claims a year.

It adds, “People can also use payroll giving to make donations, which means they don’t have to wait until the end of the year to claim the tax credit.

“Payroll-giving, where offered by their employer, gives someone the opportunity to donate to approved organisations directly from their pay and receive immediate tax credits that reduce their PAYE payable.” For more info, see https://tinyurl.com/nzpayrollgiving.

We should note here that the days of the child care and housekeeper rebates are numbered. The government announced in the recent Budget that we can make claims for such expenses incurred in the year ending 31 March 2012, but not after that.

I can’t resist making one further comment, about your idea of asking people to consider donating their tax rebate to your charity.

This year, two charities that I had donated to mailed me IR526 forms. “Good,” I thought, “I don’t have to wait for Inland Revenue to send me one, or to download one.” But then I noticed that each charity had filled in their name as the recipient of the rebate.

My reaction was, “You greedy pigs! I’ve already given to you, and now you want to hog the whole rebate too.”

I know, I know, they’ll use the money to do good things, not to line their own pockets. But I want to choose who gets how much of my money. I don’t appreciate being pushed. It made me feel quite negative towards those two charities. Has anyone else felt that way — or am I just a meanie?

AThat apparently depends on what you sign up for.

Southern Cross offers no fewer than 22 health insurance plans, “with 105 variations for various levels of coverage, budgets and life stages”, says Peter Tynan, chief executive of Southern Cross Health Society.

“The KiwiCare Budget plan (which is being referred to in your letter) is one of the lowest cost plans offered by Southern Cross — approximately 2.5 per cent of our membership are on this plan.”

It “provides a contribution towards the cost of diagnostic tests, consultations and surgery. It is not designed to cover the full cost of surgery, and the lower premiums charged for this plan reflect this.”

Even so, your 59 per cent cost recovery is lower than usual. In 2011, people in your plan received average reimbursement of 81 per cent of total costs for surgical claims, and 69 per cent for other medical services, says Tynan.

He adds that the $100 deduction is not a processing fee, but a $100 excess per claim form, “in exchange for lower premiums”. If you want to save money, you can make several claims on the one form.

It seems then that you have what my mother might have called the “cheap and nasty” plan. Obviously there are other options that give fuller coverage for major medical problems whilst keeping premiums down by not covering the minor stuff.

AYou can certainly keep on contributing if you wish. The tax credits and compulsory employer contributions will stop. But some employers have said they will continue to contribute anyway. Ask the boss — nicely!

AYou should definitely keep contributing until your fifth anniversary. Although the $521 maximum tax credit is half what it used to be, it’s still worth getting.

But you obviously joined KiwiSaver after age 60, so once your five years are up the tax credit stops, and the game changes.

Might your account balance go down after that? The money in the balanced fund, in particular, will sometimes decrease as the markets move. But that’s not important. What matters is whether it trends downwards or upwards over several years.

As you say, that depends on the fund’s performance and fees. Nobody can predict performance, but you can check and compare fees on the KiwiSaver Fees Calculator on www.sorted.org.nz or at www.canstar.co.nz. You might want to switch to a lower-fee provider.

However, even with low fees, your relatively low balance — probably around $11,000 to $15,000 after five years given your contribution level — could be problematical.

Let me explain. KiwiSaver fees consist of a flat amount and a percentage — perhaps $35 a year plus 0.5 per cent of your balance in a low-fee provider. Here’s what that amounts to:

• On $13,000, the total fee is $35 plus $65, or $100 a year, which is 0.77 per cent of your balance.
• On $100,000, it’s $35 plus $500, or $535 a year, which is just 0.535 per cent of your balance.

Flat fees hurt smaller balances more.

Still, I would be surprised to see your KiwiSaver account dwindling over time. A part-conservative, part-balanced investment normally grows, after fees — albeit fairly slowly.

Will it grow faster than a bank term deposit? Well, KiwiSaver funds, which are all PIEs, are taxed at lower rates than ordinary term deposits, which gives them an advantage. But maybe you could choose a PIE product with the bank.

Beyond that, who knows? In situations like this, it’s often good to get the best of both worlds, by transferring half to bank deposits and leaving the rest in KiwiSaver.

One reason to leave at least some in KiwiSaver is that you should be able to withdraw money pretty much when you want to — check that with your provider. In term deposits you’re stuck until the maturity date.

By the way, the $87-odd you have been contributing each month is not a minimum. As a non-employee, you can put in any amount or nothing. But $87 — I can’t be bothered with cents — is the smallest amount that will give you the maximum tax credit. So it’s a good amount to contribute.