A raft of new KiwiSaver measures are now in place after parliament passed an omnibus tax law last week.
As reported here, the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act includes reforms that empower the Inland Revenue Department (IRD) to change the prescribed investor rate (PIR) of scheme members.
The rule change allows the IRD to force portfolio investment entity (PIE) funds to alter individual PIRs as directed.
During the final debate last week, Stuart Nash, Revenue Minister, said: “When investors are on an incorrect prescribed investor rate, or PIR, either too much or too little tax can be paid. When too much tax has been paid, there is no legislative provision that exists allowing the overpayment to be refunded. “The bill addresses this issue by allowing automated refunds of overpaid tax through the simple and efficient means of a square-up process.”
However, the new legislation – awaiting Royal Assent – also speeds up the flow of information and funds between KiwiSaver providers, the IRD, employers and members, taking advantage of technology upgrades across the system.
For example, as of April 1 this year KiwiSaver providers must transfer funds to other schemes on request within 10 days compared to the current 35-day limit.
Nash said the law also removes “the three-month grace period for people invalidly enrolled in KiwiSaver to gain residency”.
While most of the changes take effect this April, a last-minute amendment extended the start date to the same month in 2022 for a few rules requiring employers and providers to pass on information to the IRD.
Among other broad-sweeping tax changes, the new law also provides reporting relief to NZ custodians that provide services to offshore investors.
National MP, Andrew Bayly, said during the final debate that the legislation charts a “pragmatic course” through IRD compliance where the NZ custodian doesn’t “actually have a lot of knowledge about the foreign investor”.
“… [the new law] says that the New Zealand custodian institution would only need to report that a return has been made to a foreign entity or a foreign custodian service and not need to report the details of the actual payments or the end investor,” Bayly said. “Now, it sounds a little bit strange, but what it does do is it then highlights to the IRD that a payment has been made and for them to be able to pursue that and be able to track down what the ultimate beneficiary of that payment is and what the nature of that relationship and transaction was.”
In an optimistic coda to the final debate, Labour MP, Greg O’Connor, noted that the PIE amendments were “timely” given the “current economic situation”.
O’Connor said the changes would give “New Zealanders who will be anxiously looking at their KiwiSavers a new realisation of what is actually going on in their portfolios”.
“ as they readjust, as they become better informed, for many who will not even understand what a PIE is—their portfolio investment entity—all of a sudden it will become quite significant, particularly as incomes may start to change.
“… it is a good opportunity for people to ensure that they’re not only aware of where they are with their investment portfolios but actually planning for the future.”
According to the latest IRD figures, KiwiSaver membership stands at just over 3.03 million as at the end of February – an increase of 10,000 month-on-month.
The IRD February statistics also show the number of KiwiSaver members on contribution holidays (now officially known as ‘savings suspensions’) was down about 1,300 over the month and almost 3,500 fewer than the same time last year. About 1,450 KiwiSaver members withdrew a collective $8.4 million on hardship grounds during February, representing both a monthly and year-on-year decrease.