Your KiwiSaver earnings are taxed, but the payout you get when you retire is tax free.
A The tax will be deducted by your scheme provider - you won't have to do anything except make sure your provider is taxing you at the correct tax rate. Your provider will ask you once a year what the rate should be.
B Portfolio investment entities are often referred to as PIEs
How does KiwiSaver work?
KiwiSaver and tax
Any growth in your savings - through interest and dividends on investments - is taxedA while it's in your KiwiSaver account. So when you come to withdraw your savings at age 65, the payout will be tax free.
Tax on your investment
The amount of tax you pay on investment returns will depend on what type of scheme you're in.
If you're in what's called a widely held superannuation fund, your returns will be taxed at 30%.
If you're in what's called a portfolio investment entityB , your tax rate will depend on your income. It'll be 30% if your income was above $38,000 or your income plus investment returns was above $60,000. If you earned below those levels, your investment will be taxed at 19.5%.
That means the tax you pay on KiwiSaver returns is likely to be below your usual tax rate.
Important
Like you, we can't predict the future - which means we can't guarantee the performance of any savings scheme. Nor do we endorse any specific KiwiSaver provider or scheme. ConsumerSaver is a good starting point - but, before you commit, we strongly suggest you seek independent financial advice. See our full disclaimer.
