How the numbers work: kiwiSaver

Simple ESCT Example

1. Annual salary: $70,000
2. Employer contributes 3.5% to KiwiSaver
3. Gross contribution: $70,000 × 3.5% = $2,450
4. Threshold test: $70,000 + $2,450 = $72,450
5. ESCT rate: 30% (falls in the $64,201-$93,720 band)
6. ESCT: $2,450 × 30% = $735
7. Net to employee's KiwiSaver: $2,450 - $735 = $1,715

How ESCT Works

1. Monthly salary: $5,833 ($70,000/12)
2. Monthly gross contribution: $204.17
3. Monthly ESCT: $61.25
4. Monthly net contribution: $142.92

How ESCT Works

1. Total gross contributions: $2,450
2. Total ESCT paid to IRD: $735
3. Total received in KiwiSaver: $1,715

Determining the Correct Rate

1. Employee earned $55,000 in year ended 31 March 2024
2. For the current tax year, use the 17.5% rate
3. Applies regardless of current year salary changes

Determining the Correct Rate

1. Employee expected to earn $85,000 this year
2. Use 33% rate
3. If actual salary $82,000, employee claims refund in tax return

Common ESCT Scenarios

1. Use current year estimated salary
2. Expected salary: $90,000
3. Use 33% ESCT rate

Common ESCT Scenarios

1. Employee worked 6 months last year, earned $30,000
2. Annualize: $30,000 × 2 = $60,000
3. Use 30% rate (based on $60,000)

Common ESCT Scenarios

1. Last year: $56,000 (17.5% rate)
2. This year: $85,000
3. Option 1: Continue 17.5% (employee claims refund later)
4. Option 2: Switch to 33% mid-year (more accurate)

Example 1: Standard KiwiSaver Employee

1. Salary: $65,000 (ESCT rate: 30%)
2. Gross annual contribution: $65,000 × 3.5% = $2,275
3. ESCT: $2,275 × 30% = $682.50
4. Net to KiwiSaver: $2,275 - $682.50 = $1,592.50

Example 1: Standard KiwiSaver Employee

1. Fortnightly gross pay: $2,500
2. Gross contribution: $2,500 × 3.5% = $87.50
3. ESCT: $87.50 × 30% = $26.25
4. Net contribution: $61.25

Example 2: Multiple Employees Different Brackets

1. Total gross contributions: $7,650
2. Total ESCT to IRD: $2,146
3. Total net to employees: $5,504

Example 3: Voluntary Contributions Above 3.5%

1. Employee salary: $80,000 (30% ESCT rate)
2. Employer contributes 6%
3. Gross contribution: $80,000 × 6% = $4,800
4. ESCT: $4,800 × 30% = $1,440
5. Net to employee: $3,360

Example 4: Salary Change Mid-Year

1. Prior year salary: $55,000 (17.5% rate)
2. January-June: Using 17.5% rate
3. Promotion in July: New salary $90,000

Example 4: Salary Change Mid-Year

1. Use 17.5% all year
2. Annual contribution: $90,000 × 3.5% = $3,150
3. ESCT at 17.5%: $472.50
4. Employee under-taxed, claims in return

Example 4: Salary Change Mid-Year

1. Jan-June: 17.5% on $27,500 = $144
2. Jul-Dec: 33% on $45,000 = $446
3. Total ESCT: $590 (more accurate)

Example 5: New Employee

1. New hire starts: August 2024
2. Estimated annual salary: $95,000
3. Use 33% ESCT rate
4. Monthly gross contribution: $237
5. Monthly ESCT: $78
6. Monthly net: $159

Payroll Integration

1. PAYE withheld: $720
2. ESCT withheld: $29
3. Total to IRD: $749

Payroll Integration

1. Employee contribution: $96
2. Employer net contribution: $67
3. Total to provider: $163

🌍 Real-World ESCT Scenarios

1. Total salaries: $185,000
2. Total gross contributions (3%): $5,550
3. Total ESCT: $1,202
4. Total net to employees: $4,348
5. Employer real cost: $5,550 (ESCT from gross)

Who this happens to, and what it meant for them

🌍 Real-World ESCT Scenarios

1. Salary: $140,000
2. ESCT rate: 33%
3. Gross contribution (7%): $9,800
4. ESCT: $9,800 × 33% = $3,234
5. Net to employee: $6,566

Who this happens to, and what it meant for them

1. Employee actual salary: $50,000
2. Correct ESCT rate: 17.5%
3. Employer mistakenly used: 30%

Who this happens to, and what it meant for them

1. Gross contribution: $1,500
2. ESCT paid at 30%: $450
3. Net to KiwiSaver: $1,050

1. Gross contribution: $1,500
2. ESCT at 17.5%: $263
3. Net should have been: $1,237

1. Over-withheld ESCT: $187
2. Employee claims in tax return
3. IRD refunds $187 to employee

1. Works December-March (4 months)
2. Earns $4,000/month = $16,000 total
3. No prior year data (new to NZ)

Who this happens to, and what it meant for them

1. Annualize earnings: $16,000 × 3 = $48,000
2. Use 17.5% ESCT rate
3. Monthly gross contribution: $120
4. Monthly ESCT: $21
5. Monthly net: $99

1. Total to KiwiSaver: $396
2. Employee keeps KiwiSaver when returning overseas

Government Contributions

1. Your annual contribution: $1,042.86
2. Government matches 25%: $1,042.86 × 0.25 = $260.72

Total government contribution: $260.72

🔢 Real-World Examples

1. Sarah's contribution (3.5%): $55,000 × 0.035 = $1,925/year
2. Employer contribution (3.5%): $55,000 × 0.035 = $1,925/year
3. Government contribution: $1,925 × 0.25 = $481.25 (capped at $260.72)

Total annual contributions: $1,925 + $1,925 + $260.72 = $4,110.72

Who this happens to, and what it meant for them

🔢 Real-World Examples

1. James's contribution (4%): $85,000 × 0.04 = $3,400/year
2. Employer contribution (3.5%): $85,000 × 0.035 = $2,975/year
3. Government contribution: $3,400 × 0.25 = $850 (capped at $260.72)

Total annual contributions: $3,400 + $2,975 + $260.72 = $6,635.72

Who this happens to, and what it meant for them

🔢 Real-World Examples

1. James's contribution (6%): $85,000 × 0.06 = $5,100/year
2. Employer contribution (3.5%): $85,000 × 0.035 = $2,975/year (unchanged)
3. Government contribution: Still capped at $260.72
4. Additional personal contribution: $5,100 - $3,400 = $1,700/year

Total annual contributions: $5,100 + $2,975 + $260.72 = $8,335.72

1. Estimated government contributions (Maria): ~$3,500
2. Estimated government contributions (Tom): ~$4,500
3. Available for withdrawal (Maria): $45,000 - $3,500 - $1,000 = $40,500
4. Available for withdrawal (Tom): $58,000 - $4,500 - $1,000 = $52,500

Total available for deposit: $93,000

Who this happens to, and what it meant for them

1. Salary: $72,000
2. Linda's contribution (6%): $4,320/year
3. Employer contribution (3.5%): $2,520/year
4. Government contribution: $260.72/year

Total annual contributions: $4,320 + $2,520 + $260.72 = $7,100.72

Who this happens to, and what it meant for them

1. Current balance: $185,000
2. 7 years of contributions: ~$49,705
3. Investment returns (avg 5.5%): ~$85,000

Projected balance at 65: ~$320,000

1. Current contribution: $1,500/year
2. Government contribution: $1,500 × 0.25 = $375 (capped at $260.72)
3. Missing out on potential employer contribution: $3,325/year (3.5% of $95,000)

Total: $2,021.43/year

Who this happens to, and what it meant for them

1. Set up automatic payment: $86.91/month ($1,042.92/year)
2. This ensures full government contribution: $260.72
3. Effective return: 25% guaranteed!

Total annual: $1,564.35 for just $1,042.92 out of pocket

1. Treat 6% of income as combined employee + employer contribution
2. $95,000 × 0.06 = $5,700/year
3. Plus government contribution: $260.72

Total annual: $6,221.43

Step 2: Work out any shortfall

1. Full amount required: $1,042.86
2. Your contributions so far: for example $700

Shortfall to top up: $1,042.86 - $700 = $342.86

🔢 Real-World Examples

1. Annual pay-based contribution: $65,000 × 3.5% = $2,275
2. This is above the $1,042.86 threshold
3. Government matches the first $1,042.86 only: $1,042.86 × 25% = $260.72

Government contribution: $260.72 (the full amount)

Who this happens to, and what it meant for them

🔢 Real-World Examples

1. Annual pay-based contribution: $22,000 × 3.5% = $770
2. Government contribution on $770: $770 × 25% = $192.50
3. To reach the maximum:
4. Shortfall: $1,042.86 - $770 = $272.86
5. Top-up of $272.86 before 30 June earns: $272.86 × 25% = $68.22 extra

With top-up: full $260.72 instead of $192.50

Who this happens to, and what it meant for them

🔢 Real-World Examples

1. Automatic contributions: $0
2. Voluntary lump sum before 30 June: $1,042.86
3. Government contribution: $1,042.86 × 25% = $260.72

Government contribution: $260.72

Who this happens to, and what it meant for them

1. Voluntary contribution: $500
2. Government contribution: $500 × 25% = $125

Government contribution: $125

1. Annual pay-based contribution: $195,000 × 3.5% = $6,825
2. Taxable income: $195,000 (above the $180,000 cap)

Government contribution: $0

Who this happens to, and what it meant for them

Why the Rate You Choose Matters

1. On $60,000 gross, 3% is $1,800 a year from you
2. At 6% it is $3,600 a year
3. Over decades, the higher rate plus its growth makes a large difference
4. But the higher rate also reduces weekly take-home pay now

The Government Contribution

1. The government matches a portion of what you put in, up to an annual cap
2. You must contribute at least a set minimum yourself to get the full amount
3. You generally need to be 18 or over, mainly living in New Zealand, and not yet at the withdrawal age
4. The exact dollar figures are set by the government and can change, so check the current amounts

Changing Your Contribution Rate

1. Lowering the rate reduces your own saving but keeps the employer and government money flowing
2. Suspending stops your contributions and usually the employer contribution
3. A suspension can also reduce the government contribution for that year
4. Treat suspension as a last resort, not a quick budgeting fix

A Simple Contribution Plan

1. 1. Contribute at least the minimum rate so you receive employer contributions
2. 2. Make sure you put in enough each year to get the full government contribution
3. 3. Lift your rate when you can afford to, for a bigger balance
4. 4. If self-employed, set a yearly reminder to top up before 30 June
5. 5. Avoid suspending unless you truly have to

🔢 Worked Examples

1. Both balances are fully relationship property, because all of it was built up during the marriage.
2. Combined KiwiSaver: $85,000 + $35,000 = $120,000
3. Each partner's half share: $120,000 ÷ 2 = $60,000
4. Aroha holds $85,000, which is $25,000 above her $60,000 share.
5. Tama holds $35,000, which is $25,000 below his $60,000 share.

To even things up, $25,000 of value needs to move from Aroha to Tama.

Who this happens to, and what it meant for them

🔢 Worked Examples

1. Their de facto relationship lasted under three years.
2. The Property (Relationships) Act generally does not apply to a de facto relationship of under three years.

Mia keeps her $22,000 and Jack keeps his $9,000. Neither KiwiSaver is shared.

Who this happens to, and what it meant for them

🔢 Worked Examples

1. Balance at the start of the relationship: $40,000 (generally Priya's separate property)
2. Built up during the relationship: $120,000 - $40,000 = $80,000
3. That $80,000 of contributions and growth is relationship property.
4. Her partner's share of the shared portion: $80,000 ÷ 2 = $40,000

Roughly $40,000 of value is shared, while the $40,000 Priya brought in stays hers.

Who this happens to, and what it meant for them

1. The $50,000 came from an inheritance, so it starts as Wiremu's separate property.
2. He kept it traceable and did not intermingle it with relationship property.

The $50,000 and its own growth generally stay Wiremu's separate property and are not shared.

Who this happens to, and what it meant for them

Why Time Smooths the Ride

1. Two members each contribute the same amount each year
2. Member A stays in a conservative fund, lower average growth
3. Member B stays in a growth fund, higher average growth, bigger swings
4. Over a few years, the difference is small
5. Over 30 years, compounding can make Member B's balance much larger
6. The trade-off is that Member B saw bigger drops along the way

Why Fees Matter More Than They Look

1. Fees are charged on your whole balance, every year
2. As the balance grows, the dollar cost of the fee grows too
3. A higher fee also reduces the amount left to compound
4. Over a working life, half a percent can cost many thousands of dollars

A Simple Way to Choose

1. 1. Work out how many years until you need the money
2. 2. Pick a risk level that fits that timeframe and that you can stick with
3. 3. Check the fund's fees and compare with similar funds
4. 4. Set it and leave it alone between reviews
5. 5. Review once a year, or after a big life change like buying a house

You Can Still Contribute

1. At 65, access opens and you choose how to use it
2. The government contribution and compulsory employer match stop
3. You can still contribute voluntarily if you keep working
4. The balance stays invested until you withdraw it

Fund Choice Still Matters

1. Money you need in the next few years: hold in safer assets
2. Money for later years: can stay in growth assets to keep working
3. This avoids selling growth assets in a downturn
4. And helps the balance keep pace with rising costs

A Simple Action Plan

1. 1. Decide what you actually need, and when
2. 2. Leave money you do not need yet invested to grow
3. 3. Keep a few years of withdrawals in safer assets
4. 4. Set a sustainable, reviewable withdrawal rate
5. 5. Remember the government and employer extras have stopped
6. 6. Review your plan each year or after a big change

Why Percentage Fees Grow With You

1. A 1% fee on a $10,000 balance is $100 a year
2. The same 1% on a $200,000 balance is $2,000 a year
3. As your balance grows over a career, the dollar cost rises with it
4. That is why a small percentage gap becomes a big dollar gap later

An Illustration Over a Career

1. Two members with the same contributions and the same underlying returns
2. Member A is in a fund charging about 0.5% a year
3. Member B is in a similar fund charging about 1.5% a year
4. Each year the 1% gap is small, and easy to overlook
5. Over 30 or 40 years, the gap compounds into tens of thousands of dollars

A Simple Fee Check

1. 1. Find your fund's annual fund charge percentage
2. 2. Compare it with other funds of the same type
3. 3. Check your annual statement for the dollar fees you paid
4. 4. Use the fee calculator to see the long-term cost
5. 5. If a similar fund is clearly cheaper, consider switching

The $1,000 That Must Stay

1. Your KiwiSaver balance is $45,000
2. You must leave at least $1,000 in the account
3. So up to about $44,000 can go towards your deposit
4. Any Australian-sourced super is generally excluded

Apply Through Your Provider

1. 1. Confirm you meet the three-year and first-home conditions
2. 2. Get a sale and purchase agreement in place
3. 3. Your solicitor and you complete the provider's withdrawal forms
4. 4. The provider releases the funds to your solicitor's trust account
5. 5. The money is applied to the purchase at settlement

A Simple Action Plan

1. 1. Check you have three years of KiwiSaver membership
2. 2. Confirm you are buying a first home to live in
3. 3. Consider a lower-risk fund as the purchase nears
4. 4. Apply through your provider early, with your solicitor
5. 5. Remember the $1,000 minimum stays in the account
6. 6. Rebuild your KiwiSaver once the home is bought

The Most Important Number to Hit

1. The KiwiSaver year runs 1 July to 30 June
2. You must contribute at least the set minimum yourself in that year
3. Contribute less and you receive a reduced government contribution
4. The exact dollar figures are set by the government and can change

Balancing KiwiSaver With Business Reality

1. First, set aside money for upcoming tax
2. Next, keep an emergency buffer for lean months
3. Then, contribute enough KiwiSaver for the government contribution
4. Finally, add extra in good months for long-term growth

A Self-Employed KiwiSaver Plan

1. 1. Make sure you have a KiwiSaver account and a suitable fund
2. 2. Set aside tax and an emergency buffer first
3. 3. Automate a regular contribution, or diarise a June top-up
4. 4. Contribute at least the minimum for the full government contribution
5. 5. Add more in strong months and review yearly

The Government Contribution You Miss

1. You suspend contributions for a full year
2. Your own contributions pause, easing your weekly budget
3. But your employer match for that year is lost
4. And the government contribution is largely lost too
5. Plus a year of compounding growth on all of it

How to Apply

1. 1. Check you have contributed for at least 12 months
2. 2. Decide the shortest period that meets your need
3. 3. Apply through myIR and choose the length
4. 4. IRD tells your employer to pause deductions
5. 5. Set a reminder to restart as soon as you can

How First Home Withdrawal Works

1. Benefit: Access deposit sooner, achieve homeownership earlier
2. Cost: Reduced retirement savings, lost compounding growth
3. Funds withdrawn lose decades of potential investment returns
4. Retirement balance will be substantially lower than if left invested

Long-Term Trade-Offs of Early Withdrawal

1. Withdraw funds early → lose not just withdrawn amount
2. Also lose all future investment returns that withdrawn amount would have earned
3. Over decades, compounding cost far exceeds amount withdrawn
4. Retirement income significantly reduced by early withdrawal

One Scheme at a Time

1. You apply to join the new provider
2. They request your balance from your current provider
3. Your money transfers across and the old account closes
4. Your contributions then flow to the new provider

A Sensible Switching Checklist

1. 1. Be clear on your timeframe and the reason for switching
2. 2. Check the new fund's type, fees, and long-term returns
3. 3. Decide whether changing fund is enough, or you need a new provider
4. 4. Apply to the new provider, or change fund with your current one
5. 5. Then leave it alone, reviewing once a year

Watch for Greenwashing

1. Read what the fund says it excludes and favours
2. Check the actual holdings if they are published
3. Compare the fees against similar funds
4. Decide if the approach genuinely matches your values

🥈 Moving to Australia

1. You move to Australia permanently
2. You generally cannot withdraw KiwiSaver as cash
3. You may transfer it to an eligible Australian super scheme
4. Or you can leave it invested in KiwiSaver