Recently there has been a flurry of stories in the media based on revelations from the Inland Revenue Department that around 1.5 million KiwiSaver members are on the wrong tax rate.
The IRD says that 950,000 have paid too much tax and 550,000 have paid too little and will get a bill for the outstanding amount for the past year.
It’s hard to work out who we should feel more sorry for: the under-payers or the over-payers. The people who have not paid enough tax have received a bill for the tax that they should have paid last year. It is easy to feel sympathetic for these people because many are going to have to find a few hundred dollars from their own resources.
Those who have over-paid get my greater sympathy. These will largely be people who need every dollar in their KiwiSaver accounts but they have robbed themselves because they had not been on the right rate. There is no provision for a refund of KiwiSaver taxes from the IRD.
Now is a good time to check you are on the right Prescribed Investor Rate (PIR) or tax rate. Most KiwiSaver members are getting letters around now with their annual member and tax statement. It would only take a minute to check the statement to see if your KiwiSaver provider has your correct tax rate.
If you don’t know what rate to be on, the IRD website has advice. There are three rates for KiwiSaver members, 10.5%, 17.5% and 28%.
If you need to change your PIR, see if your KiwiSaver provider lets you update it online or ask them for a form.
As Benjamin Franklin said, nothing in life can be more certain than death and taxes. So, it’s important that if you have to pay tax, at least make sure you are not paying too much or too little.
Martin Hawes is an Authorised Financial Adviser. This is not a recommendation to buy or sell any financial product and does not take your personal circumstances into account. All opinions reflect our judgement on the date of article and may change without notice. Past performance is not a reliable guide to future performance. We recommend you take financial advice before making investment decisions. We have prepared this article in good faith based on information obtained from other sources, but we do not guarantee the accuracy of that information. We do not make any representation or warranty (express or implied) that this web page is accurate, complete, or current and to the maximum extent permitted by law disclaim any liability for loss which may be incurred by any person relying on this article.
The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd. You can obtain the Scheme’s product disclosure statement and further information about the Scheme on this website, from one of our offices, or by calling us on 0800 11 55 66. Forsyth Barr Investment Management Ltd is a licenced manager of registered schemes and part of the Forsyth Barr group of companies. Disclosure statements are available from Martin Hawes and your Forsyth Barr Authorised Financial Adviser, on request and free of charge.