Michael Cullen chairing the new government’s tax working group could be a boon to the KiwiSaver industry, it has been predicted.
Cullen, the architect of the retirement savings scheme, will head up the group which will have “wide mandate” to look at New Zealand’s whole tax system. It has specifically been tasked with looking at GST and potential measures to slow growth in house prices.
But KiwiSaver providers said the scheme could get some attention, too. Changes to the tax regime could make the scheme significantly more appealing, for example, if deductions were exempt from tax or other concessions were put in place.
In Australia, deductions made before tax are taxed at a rate of 15 per cent. Deductions made from after-tax income are not taxed.
There has previously been criticism that long-term New Zealand savers in managed funds are at a tax disadvantage.
The FSC put out a report in 2013 that said: “No other country has out combination of comprehensive taxation on the return on debt instruments as they accrue, no superannuation tax concessions, no tax on capital gains on rental properties, and the unconstrained deductibility of the nominal value of interest against other income on debt used to purchase rental property.”
A decision around the KiwiSaver scheme was withheld from one of the briefings to incoming ministers made public last week.
A description of the decision, in a document for Commerce and Consumer Affairs Minister Kris Faafoi, was withheld under the Official Information Act. It was reported that, according to the State Services Commission the rule is applied where there is concern that the release of the draft advice would interfere with the ability of a decision-maker to consider the advice tendered.
Sources speculated that could be related to KiwiSaver coming under the remit of the working group – although most providers spoken to said they were in the dark, as well.
Finance Minister Grant Robertson has already indicated that Labour wants to increase the minimum regular KiwiSaver contribution rate from 3% to 4.5%, and make the scheme universal – although there would still be significant exclusions, including for students, beneficiaries and self-employed people.