The government will remedy a technical problem in the KiwiSaver legislation to ensure the smooth introduction of the new member tax credit, Finance Minister Michael Cullen and Revenue Minister Peter Dunne announced today.
As announced in Budget 2007, people who join KiwiSaver will be entitled to a tax credit that matches their contributions up to $20 a week from when they become a member. That will be paid directly into their accounts annually, they said.
As it is worded, the legislation does not reflect this policy intent, with the result that some savers would not become eligible for the tax credit until several weeks after they began making contributions. That is not how the legislation was intended to work.
Therefore we will be introducing a law change ensuring that savers will be eligible for the member tax credit from the date they begin making contributions.
The member tax credit will apply from the first of the month in which the contribution is made. This means, for example, that all contributions that begin in July will be matched by a tax credit from 1 July; those that begin at any point in August will count as having begun on 1 August, and so on.
The change will be added to the taxation bill that is currently before Parliament by means of a Supplementary Order Paper to be released within the next few weeks, the Ministers said.