The employer portion is also tax free
Didn't that change in the last Budget?
At the moment (I'm an employer, my company only employs myself) I can only give the mimimum employer contribution (2% going to 3%) tax free to my employees, any more and I have to withhold tax on that income and report it as income to the IRD - this is exactly equivalent to my employee earning exactly that amount more and choosing to put it in kiwisaver - I may as well pay my employee that money and let them choose (ie it's pretty pointless for an employer to put in more).
As I mentioned above not explained by Labour is: will the 7% employer contribution also (or all) be tax free? If so the Farrar's analysis is crap because getting a tax free 7% in your kiwisaver and losing a taxed 7% from my salary is obviously much better for me.
I agree that the Aussie tax deferred system (or a US 401K which is the roughly the same) is a better way to do things for Kiwisaver in general. For those who are unfamiliar with these - in a tax deferred scheme you put money into a retirement account before tax is paid - you (hopefully) make money in the account over time, it's not taxed, and when you retire you take the money out and as you do you finally pay the tax on it - usually at a lower marginal rate because when you're retired you're earning less than you were when you were working and putting the money aside
didn't that change? I'm not sure, if it has it hasn't kicked in yet (just like the 3% hasn't kicked in yet - I would guess April 1st) - at the moment there's two parts: the employer can claim a tax credit for their contribution and the employee doesn't pay tax on what they receive it may be that the employer tax credit has gone away
I would guess April 1st
Due on July 1st, I recall - but it applies back to July *this year*, not "after the election" as English promised.
National's 'employment' policy released. Spanking the uppity workers and the young.
National's 'employment' policy released. Spanking the uppity workers and the young.
Jezuz. We have to get more kids to vote.
Poking around on the IRD/KS web site I can't see anything different from what I've described above (for current wages ie today)
Ah! here's a list of changes:
"Compulsory employer contributions will rise from 2% to 3% from 1 April 2013"
"All employer contributions to employees' KiwiSaver accounts (and complying superannuation funds) will be subject to employer superannuation contribution tax (ESCT) from 1 April 2012. ESCT will be applied at a rate equivalent to an employee's marginal tax rate."
That last one does mean that the tax free portion of the employer contribution will go away April 1 next year - in essence National have reduced your KS contribution by ~1/6, if you're paying 2%+2% KS and are on the high marginal tax rate, and are keeping the money for themselves
That last one does mean that the tax free portion of the employer contribution will go away April 1 next year – in essence National have reduced your KS contribution by ~1/6
it's worse than that. the employer increases their contribution, but ALL of this contribution is now taken away in tax. in combination with the halving of the govt contribution to $520, if you're in the top tax bracket (marginal rate of 33%) it you'll also lose a small portion of the previous 2% making for a net loss from today's setting.
in effect this is a kiwisaver "rich tax", and should be revenue positive. if labour increase the employer contribution, they're really just increasing their tax take.
I think that given that National have already done this bit of take back then if Labour increase the 3% to 7% (still taxed) then I'm better off as if my gross had increased by 107/103 = 3.9% and I was being taxed normally - at the top marginal rate my KS investment will go up by 66% of 3.9% = 2.6% of my gross.
So the National change takes a little from me, the Labour change gives me actual new savings.
(in my case where I'm an employer who pays myself as an employee and runs the company basically as a non-profit - my monthly gross is what's left in the bank at the end of the month, National's KS change will actually take 1% of my net income [the bastards!] - the same is true of anyone who ends up in a situation where their employer trades their employer's portion KS contribution for their gross)
Because they are too incompetent to increase productivity by a tiny amount each year any other way
Have you met some of the er people that manage our companies in NZ?
I dont, and havent, for the past decade-
you fellas are entirely out of my non-income bracket-
They live in a completely different world!
(By which I mean that people like Keri and me have a slightly different business model than most other small business people. An uneconomic business model. We don't pay ourselves as employees for a start. Not enough money for that.)
Yes, and they deserve better than a government which believes their only hope of success is to make it easier to take more from their staff. That's far from ambitious.
The compulsory contributions are going to increase over time (did Goff say 7%? I was distracted when he was on the radio talking about it), and employers might well not have room to additionally add in the hand wages rises on top of this.
Increasing at a rate of 0.5% per year. Treasury's projecting (yeah yeah, I know) wage growth of 3.8% per annum. Even if Treasury's only got it half right, that's still a 1.4% increase in wages over and above the employer's contribution.
And, frankly, I'm bloody sick of the harping on about how employers can't afford this. We put up with far too many shitty employers in this country, and let them get away with murder because, somehow, they're doing the country a favour by deigning to employ people. If they don't want to wear the cost, then they can be upfront with their employees about how they're too stingy to care for their employees' long-term financial health, and will be granting lower pay increases as a result. But if they can't afford to wear the cost, then they're probably on the verge of going under anyway. A 0.5% increase in the annual wage bill is fuck-all of nothing.
The bigger pciture - Rod Oram from 2008 on why low wage policies are for losers. Any opposition who can't make that point stick deserves a bullet.
Increasing at a rate of 0.5% per year. Treasury’s projecting (yeah yeah, I know) wage growth of 3.8% per annum. Even if Treasury’s only got it half right, that’s still a 1.4% increase in wages over and above the employer’s contribution.
I really don't think you get to say "yeah yeah, I know", here Matthew. I don't give a bugger if its Cunliffe or English doing it, but when the benefit of a policy is entirely predicated on projections that have a track record of being only slightly more reliable than staring at a bucket of chicken entrails I think "yeah, right" is more appropriate.
That's why I tempered it by halving Treasury's projections, Craig. At some point wages will increase, and Labour's not talking about introducing the policy immediately. Or do you think that another term of National will put the country into terminal decline and wages will never rise again?
ETA: I also think the policy needs to be implemented regardless of the accuracy of Treasury's projections. We've coddled business owners long e-bloody-nough about how they treat their staff. I'd like to see a provision that forces employers to disclose when they are reducing pay increases to compensate for increased employer contributions into KS, with stiff monetary penalties for misleading behaviour. If they're too cheap to pay their staff properly, they should be at risk of it costing them far more than the saved wages if they aren't honest about it.
I’d like to see a provision that forces employers to disclose when they are reducing pay increases to compensate for increased employer contributions into KS, with stiff monetary penalties for misleading behaviour.
On the face of it, I'd agree with you - but would be damned if I could see how you make that work. Really. (Though it could be fun if some whey-faced judge had to decide whether the Government was bullshitting the next time teachers and health workers are told to show "wage restraint".) I'm between agnostic and 'not enough of a data ninja to assess the argument' about whether Labour's policy would drive down wages. But, damn, I wish Cunliffe wasn't quite so blithe about it leading to lower wage increases. Yeah, it's easy to be detached when you're in Parliament -- base salary of $130K, generous benefits and all the rest. But if politicians don't like being viewed as offensively out of touch and patronising, it would help if they didn't try and earn it.
We’ve coddled business owners long e-bloody-nough about how they treat their staff. I’d like to see a provision that forces employers to disclose when they are reducing pay increases to compensate for increased employer contributions into KS, with stiff monetary penalties for misleading behaviour
And yet, The John Key Party (that's the brand they're trading on) just today came out with a policy that would reduce wages. Not only that, but take three dollars an hour off those on the minimum wage.
You can't spin it otherwise. Not only does it directly reduce wages, but it puts downwards pressure on the wages of every earner who competes in these wage segments, and directly pulls down the entire wage sector. Of course, the higher up you go, the less direct influence this has on you, and if you take income as profits or dividends then the effect is opposite.
John Key, stealing from the pockets of young poor workers. Oh yeah, they're young, so they deserve it.
But if politicians don’t like being viewed as offensively out of touch and patronising, it would help if they didn’t try and earn it.
Quite. But you can't blame the politicians, really. The electorate votes for it, time and again. A party doing just what you describe is extremely popular right now.
You can't spin it otherwise.
I believe they tried the "better to be paid bugger all than nothing" line - ie: that it would create more jobs. Beans.
Beans are good - nothing wrong with them - it is keanuts that are a problem - you can't plant and growth anything form the roasted ones.
But, damn, I wish Cunliffe wasn’t quite so blithe about it leading to lower wage increases.
Given the state of wage increases in recent years, lower is still better than none. I'm sure the Parliamentary Secretaries and EAs would love to get any pay increase, after generously being offered zero percent for the next three years, following on from the lucrative zero percent they've received since National came to power. I think they'd happily take 1% minus 0.5% over what they've been getting lately, and I'm sure they're not alone.
You are right on the button.
Saving is actively discouraged by ridiculous tax rates.
No wonder political parties blather on about savings, it means revenue for governments.
When did Treasury ever get anything right?
Dear Flying Monkey Despotisores,
talking about saving, we are about to be saved from ourselves:
Thank goodness - I would have never have worked it out on my own.
if you post just the full youtube address (including the http) without any square brackets, it embeds itself automatically.