Subpart 4 - Contributions holidays

KiwiSaver Act 2006 – Part 3 subpart 4 allows KiwiSaver members to receive a holiday from compulsory deductions of contributions from their salary or wages.

This subpart allows KiwiSaver members to receive a holiday from compulsory deductions of contributions from their salary or wages.

Applying for a contributions holiday

Under section 102 an individual can apply to the Commissioner for a contributions holiday any time after:

  • the Commissioner receives the first contribution for the person if they are suffering or are likely to suffer financial hardship;
  • 12 months have expired since the earlier of:
    • the date that the Commissioner received the first contribution for the person; or
    • the date that a provider received the first contribution for the person's membership of a KiwiSaver scheme.

Under section 103 an application for a contributions holiday can be made by any means that the Commissioner accepts. The application must tell the Commissioner:

  • the person's name and address;
  • the person's tax file number;
  • the name and address of each employer that the person intends the holiday to apply to;
  • the period of time that the holiday is required;
  • in the case of financial hardship, the details of that hardship (Inland Revenue will provide guidelines as to what constitutes "financial hardship"); and
  • any other information that the Commissioner requires.

Grant of a contributions holiday

Under section 104 the Commissioner must accept an application for a contributions holiday if the Commissioner is satisfied that the person meets the requisite criteria and provides the required information.

A financial hardship contributions holiday will be granted for a period of three months, unless the Commissioner agrees to a longer period. Any other contributions holiday will be granted for a minimum period of three months and a maximum period of five years or the period specified in the application (whichever is the shorter).

As soon as practicable after granting a contributions holiday, the Commissioner must give notice under section 105:

  • to the person who applied for the holiday, that the holiday has been granted and the date on which the holiday will end;
  • to each relevant employer, that a contributions holiday has been granted and that the employer must stop making deductions of contribution from the salary or wages of that person;
  • to the provider of the person's KiwiSaver scheme, that a contributions holiday has been granted, the names of the relevant employers and that deductions of contributions may not be made from the salary or wages paid to the person by the relevant employers during the period of the holiday.

"Relevant employer" means each employer that the contributions holiday was intended to apply to, as stated in the person's application to the Commissioner.

If an employer is notified by the Commissioner that it must stop making deductions of contributions for an employee, under section 106 deductions must cease from the next payment of salary or wages that the employer calculates after the date on which the notice is received.

Employers to whom contributions holiday applies

Section 107 specifies that a contributions holiday applies to each employer as stated in the person's application to the Commissioner. If the person chooses, it may also be used for any other employer.

End of contributions holiday

Sections 109 to 111 set out what happens at the end of a contributions holiday. The Commissioner must give notice to a KiwiSaver member who is taking a contributions holiday before the holiday ends. The Commissioner must also give notice to each affected employer known as soon as practicable after the end of a contributions holiday. The notice must specify the date on which the contributions holiday ends and the date on which the employer must start making deductions of contributions from the salary or wages of a person.

Section 112 allows a person to revoke his or her contributions holiday with an employer at any time by giving notice to the employer to make deductions of contributions from their salary or wages. To prevent employees requesting employers to stop and start deductions of contributions too often, section 108 specifies that a contributions holiday may not be used for less than three months, unless the employer agrees.

Deductions of contributions must begin from the next payment of salary or wages that is calculated after the date on which the employer receives the notice from the Commissioner or the KiwiSaver member.

Refunds

Section 113 allows a KiwiSaver member to apply to the Commissioner for a refund of initial contributions held in the Inland Revenue holding account if the person is suffering, or likely to suffer, significant financial hardship or if he or she is suffering serious illness, as defined in Schedule 1 of the Act (as outlined below).

The applications may be made by any means that the Commissioner accepts. The application must tell the Commissioner:

  • the person's name and address;
  • the person's tax file number;
  • details of the significant financial hardship or serious illness; and
  • any other information that the Commissioner requires.

The Commissioner must refund the contributions to which the application relates if the person and the application meet the requirements. However, no refund of any employer contributions will be made. The Commissioner must give notice of the refund to the provider of the relevant KiwiSaver scheme.

If an employee who is taking a contributions holiday starts new employment and cannot show his or her employer that they are taking a contributions holiday - for example, if they lose the notice from the Commissioner granting the contributions holiday, the employer will be required to make deductions of contributions from their salary or wages. The employer may, however, refund to the employee any contributions deducted under section 114 if the employee can later show the employer that they are taking a contributions holiday - for example, if the employee got a replacement notice from the Commissioner. The Commissioner may also refund those contributions to the employee if they are held by the Commissioner.

Example one
Joyce has been a KiwiSaver member for two years. She applies to the Commissioner for a contributions holiday. In her application she states that she wants the holiday to apply to both of her employers and that she wants to take a contributions holiday for one year. The Commissioner accepts Joyce's application and gives notice to her employers to stop making deductions of contributions from her wages. Three months later, Joyce decides that she wants contributions to begin from the wages she receives from her main job. She gives notice to her employer requiring deductions of contributions from her wages. As required, her employer begins making deductions. Close to the expiry of her one-year contributions holiday, the Commissioner writes to Joyce stating that her contributions holiday is about to end. Joyce does not apply for another contributions holiday and the Commissioner writes to her employer stating that deductions of contributions must begin.

Example two
Tony has been contributing to KiwiSaver for five months. He is struggling to make ends meet and applies to the Commissioner for a contributions holiday. After receiving evidence of his financial situation, the Commissioner grants Tony a financial hardship contributions holiday for three months. Three months later, Tony is still struggling and is granted another contributions holiday.

Example three
Jin is taking a contributions holiday and starts new employment. He has lost his contributions holiday letter and so his employer must begin making deductions of contributions. He has had $300 deducted from his salary before he finds the letter from Inland Revenue granting the holiday. Jin shows the employer his letter and deductions of contributions stop. Because his employer has already paid the contributions to Inland Revenue, the Commissioner refunds the $300 to Jin.

Example four
Mohammad has been contributing to KiwiSaver for six years and wants to take a contributions holiday. His application for a three-year holiday is accepted. The Commissioner writes to Mohammad shortly before his contributions holiday expires. Mohammad applies for another three-year contributions holiday which is granted