Tax Bill includes proposed KiwiSaver changes
The Taxation (KiwiSaver, Student Loans, and Remedial Matters) Bill (158—1) was introduced (27 June 2019). Among its proposed provisions are a number relating to KiwiSaver, which will, if passed, result in amendments to the KiwiSaver Act 2006.
The following is an extract from the explanatory notes to the Bill.
The Bill proposes a number of changes to improve the administration of the KiwiSaver scheme. These changes facilitate faster transfers of funds, improve the administrative efficiency and enhance members’ experience with the scheme.
Payment of employer contributions
The Bill proposes to allow Inland Revenue to pass KiwiSaver employer contribution amounts (both compulsory and voluntary) to scheme providers, before the contribution amount has been received by Inland Revenue. Employer contributions would be forwarded to providers as soon as practicable after employment income information has been provided to Inland Revenue. This would improve the administrative efficiency of the KiwiSaver scheme and members would receive the benefit of their contributions being invested with scheme providers sooner. The change would align with the existing treatment of employee contributions.
Calculating interest on contributions from the employee’s payday
The Bill contains changes to ensure that interest on employer and employee contributions begins to accrue from the employee’s payday, until the contributions are forwarded to the KiwiSaver scheme provider. When KiwiSaver was introduced Inland Revenue’s systems could not calculate interest from the employee’s payday without imposing compliance costs on employers. The introduction of payday filing overcomes this obstacle.
Reducing the KiwiSaver provisional period and holding period
When automatically enrolled in KiwiSaver, members are provisionally allocated to a default provider. Inland Revenue is not able to transfer contributions to scheme providers until the end of the provisional period. The Bill reduces the provisional period and the initial holding period from 3 months to 2 months.
Reducing the timeframe for the transfer of member’s information and funds between providers
When a KiwiSaver member decides to transfer schemes, the old provider must transfer funds and information within 10 working days for default providers and 35 days for non-default providers. The Bill proposes that this period be reduced to 10 working days for all providers.
Giving employees more ways to change their contribution rates
Currently, members can only change their employee contribution rate by giving notice to their employer. The Bill proposes that members would also be able to change their contribution rate by notifying either their scheme provider or Inland