2007 amendments to the KiwiSaver Act covering the use of PAYE intermediaries, late opt-out notices, master trust schemes, casual employees and more.
A number of other amendments have also been made to the KiwiSaver Act.
The following amendments are treated as coming into force on 1 July 2007
Use of PAYE intermediaries
Amendments have been made so that PAYE intermediaries can:
- accept KiwiSaver opt-out notices (section 17);
- be treated as an employer for the purpose of the notice requirement provisions for people who start new employment (section 23A); and
- be treated as an employer for the purpose of the opt-in rules (section 34).
Late opt-out notices
An amendment to section 18 ensures that the Commissioner can accept a late opt-out notice if it is received by the employer or the Commissioner in the period ending three months after the date on which the Commissioner received the first contribution for the person. Previously the opt-out could only be received by the Commissioner.
Eligibility of employers who have schemes established under master trusts
Section 28 has been amended so that an employer using a Master Trust scheme as a vehicle for an exemption can use any other evidence to demonstrate compliance with the exempt employer criteria.
Section 40 has been amended to ensure that there is no inference that the Commissioner of Inland Revenue would, on an ongoing basis, forecast the number of information packs employers would need and issue them automatically. The Commissioner will regularly remind employers of the need to ensure they have adequate information packs.
Final allocation of members to a scheme
Sections 48 and 51 have been amended so that final allocation to a KiwiSaver scheme does not occur when a dispute is underway and ensures that final allocation to a KiwiSaver scheme occurs "as soon as practicable" three months after the Commissioner received the first contribution for the person.
Commissioner provisionally allocates certain people to default KiwiSaver schemes and sends investment statement
Section 50 has been amended to clarify that the exemption for the Commissioner from sending an investment statement for a default scheme because an employer has a chosen scheme will apply only to employment that triggered the automatic enrolment rules.
Section 57 has been amended so that an employer-chosen scheme does not apply in the case of involuntary transfers.
Private domestic workers
New sections 63A and 92A provide that private domestic workers, who choose to deduct their own PAYE and contribute to KiwiSaver from their salary or wages, can be both an employer and employee for the purposes of KiwiSaver.16
Permanent legislative authority for on-paying contributions received through section 73
Section 73 has been amended so that a permanent legislative authority is established to allow Inland Revenue to on-pay deductions from salary or wages entered in the holding account. Because the relevant part of section 73 is also subject to the on-payment requirements of sections 75 (initial contributions) and 77 (small contributions), consistent amendments have been made to those sections as well.
Section 75 has been amended so that the Commissioner holds contributions for a person in the Inland Revenue holding account for three months only after receiving the first contribution for the member or receiving notice that the person is a member of a KiwiSaver scheme.
Refund by Commissioner of amounts paid in excess of required amount of deduction or if employee opts out
Section 80 has been amended so that refunds of ad hoc contributions (contributions not deducted from salary or wages) are allowed.
Pro rating of employer contributions when contributions short paid
An amendment is being made to section 99 to allow the formula providing for the pro rating of employer contributions where the contribution is short paid to consider part payments. The amendment also clarifies that if an employer contribution is short paid, no more than 100 percent of the contribution recorded for an employee will be attributed to that person.
Duty of Commissioner under section 50 modified in certain cases in which section 210 applies
Section 211 has been amended to remedy drafting issues.
An amendment has been made to section 215 to ensure that a KiwiSaver penalty will not be imposed if the Commissioner has not given the employer notice within the preceding 12 months that a penalty may be, or has been, imposed.
Consent to electronic transactions
Section 219 has been amended to exclude the Commissioner or any employee or officer of Inland Revenue from the deemed consent provided for in that section.
Refunds made by employer by direct credit
Section 221 has been amended to clarify that the requirement to give a refund by direct credit to a bank account applies only to the Commissioner.
The following amendments to the KiwiSaver Act come into force on 1 April 2008
Section 6 has been amended so that:
- the Act applies to people who, at the time they become subject to the automatic enrolment rules or opt in are, or normally are, living in New Zealand; and
- non-resident employers with no fixed establishment in New Zealand are included within the scope of KiwiSaver if they so elect, either by deducting KiwiSaver contributions from an employee's salary or wages and/or making employer contributions. These employers are entitled to the employer tax credit in respect of employer contributions.
Excluding casual employees from the automatic enrolment rules
Section 12 has been amended to exclude casual employees from the automatic enrolment rules. "Casual employment" is defined by reference to the Holidays Act 2003 as employment that is "intermittent or irregular". The effect is that if employees are paid holiday pay regularly with their salary or wages they will be excluded from automatic enrolment. Those employees can continue to opt in to KiwiSaver, either by providing a deduction notice to their employer or by contracting directly with a scheme provider.
This section has also been amended so that the current rules will continue to apply to temporary fixed‑term employment. Employers are excluded from the automatic enrolment rules if their employment contract is for a period of 28 continuous days or less. If employment is extended beyond 28 days, on day 29 the employee becomes subject to the automatic enrolment rules.
Section 85 has been amended so that the start date for the calculation of interest on employer contributions held in the Inland Revenue holding account is the first day of the month in which contributions were received by Inland Revenue. This also applies to contributions received to which the employer tax credit applies.
Restrictions on transactions
New section 117A imposes investment restrictions on KiwiSaver schemes with fewer than 20 members. For the purposes of determining the number of members, a person associated with a member under section OD 8(3) of the Income Tax Act will be treated as one person. This provision will:
- require a transaction between the scheme provider and a person associated with either the provider or a member to be at market value;
- limit to 5 percent of the scheme's assets, investments related to or managed by the provider (other than in their capacity as a provider), a member or a person associated with a provider or member; and
- prevent a provider from lending money or providing financial assistance to a member or a person associated with the provider or member.
Effect of registration of KiwiSaver scheme under section 150
Section 153 has been amended so that KiwiSaver schemes registered under an umbrella superannuation scheme trust can be treated as separate for the purposes of the portfolio investment entity rules.
Objections and appeals against decisions of Financial Markets Authority
Section 186 has been amended, as part of introducing compulsory employer contributions. The amendment does not allow a person to appeal against an election made by the Financial Markets Authority relating to short payment of compulsory employer contributions to a CSF.
Amendments treated as coming into force on the date of assent
Sections 10 and 11 have been amended so that employees who enter into a secondment arrangement whereby they are transferred from one employer to another but remain "employed" by the original employer are not subject to the automatic enrolment rules.
Employees under secondment arrangements will be subject to the automatic enrolment rules if, after entering into the arrangement, they terminate employment with the original employer and begin working for the employer they were seconded to.
Effect of opting in by employees
Section 36 has been amended to clarify that a person opting in via a provider must specify the name of their employer if that person is an employee (clarifying that deductions are required from salary and wages).
Employer may choose scheme for employees
Section 46 has been amended so that an employer can have a chosen KiwiSaver scheme for its employees only if the scheme is open to all permanent employees (new or existing).
Notification of transfers and requirement to transfer funds and information
Section 56 provides that when a member of a KiwiSaver scheme transfers to a new scheme, the provider of the old scheme must advise the new provider whether the Crown contribution (the $1,000 kick-start contribution) is part of the member's accumulated interest that is to be transferred.
Refund by provider of amounts paid in excess of required amount of contribution
Section 81 has been amended so that providers are required to refund to the Commissioner the amount of contribution that the Commissioner requests, up to the amount in excess of what was required to be paid under the Act.
Section 84 has been amended so that:
- section 68(2) of the Public Finance Act 1989 does not apply to returns on the investment of holding account money and interest earned from 1 July 2007 is public money; and
- a person can notify the Commissioner if they do not wish to be paid interest on contributions held by Inland Revenue or on a refund.
Section 86 has been amended so that interest calculations for money held in Inland Revenue's holding account and payable is limited to two decimal places.
Refunds of employer contribution by provider
Section 101 has been amended so that a provider of a KiwiSaver scheme must refund to the Commissioner any amount of employer contribution that the Commissioner requests when that amount has been paid in excess of the employer contribution required under the KiwiSaver Act.
Who may apply for a contributions holiday
Section 102 has been amended so that if a member transfers from a CSF to a KiwiSaver scheme, the time during which they have contributed to the complying fund counts towards the time for eligibility for a contributions holiday.
Refund of initial contributions
Section 113 has been amended so that for applications for a refund of initial contributions held in the Inland Revenue holding account on the grounds of significant financial hardship, the Commissioner will have authority to consider whether alternative sources of funding have been explored and to limit the amount withdrawn.
Further modifications to application of section 8 to 11 of the Superannuation Schemes Act 1989
The reference to a "superannuation scheme" in section 121(3)(a) of the KiwiSaver Act 2006 has been replaced with the term "KiwiSaver scheme".
Requirement for annual report and annual personalised statement of contributions and accumulations for members
New section 125A requires all KiwiSaver and complying superannuation scheme providers to supply members with a personalised statement of their investment holding, on at least an annual basis. At a minimum, all member statements should provide information on:
- the level of contributions made by the member, employer and Crown in the period since the last member statement; and
- the total value of the member's interest in the scheme.
New sections 128B, 128C and 128D ensure that legislative terms are implied into the existing trust deeds. These sections cover:
- back-dated validation of enrolment (section 128B);
- lump sum payment by a CSF (section 128C); and
- compulsory employer contributions (section 128C).
In addition, section 128A has been amended to ensure that the legislative terms relating to the member tax credit are implied into existing trust deeds rather than thelaw.
Amendment of trust deed governing KiwiSaver scheme
Section 129 has been amended to ensure that if trustees of a KiwiSaver scheme propose to make any changes to any participation agreement entered into between the scheme trustees and any employer, the solicitor of the scheme must provide certification that the amendment is consistent with the requirements of the KiwiSaver Act and the Superannuation Schemes Act.
Certain sections of Securities Act 1978 modified in relation to KiwiSaver Scheme
Section 210 has been amended so that if an involuntary transfer arises under KiwiSaver, the amount that is transferred is, at a minimum, the member's accumulation.
Section 225(2) has been amended to remove the ability for the Chief Executive of the Ministry of Economic Development to delegate authority for administration of the $1,000 Crown contribution.
Section 226 has been amended to provide flexibility around when the Crown contribution (the $1,000 kick-start contribution) must be paid to employees and members transferring from a CSF to a KiwiSaver Scheme, and so that the Crown contribution is paid only into an account that is fully vested in the member.
Regulations relating to a mortgage diversion facility
Section 229 has been amended so that:
- the mortgage diversion facility will apply for the remainder of the term of the loan after the diversion is made available, but only in relation to a mortgage over the person's principal residence; and
- the amount that can be diverted under mortgage diversion is no more than half the member contribution received by a provider, including both member contributions paid via Inland Revenue and those received directly from the member.
Contributions to a CSF can be diverted and applied towards payments of the person's mortgage, provided the same conditions that apply to KiwiSaver mortgage diversion are met.
Protection for non-compliance: Taxation (KiwiSaver) Act 2007
Section 234 was introduced as a transitional measure. This provisional measure ensures that if as a result of the amendments made in the Taxation (KiwiSaver) Act there has been non-compliance with other Acts (for example, investment statements issued under the Securities Act 1978) before 1 February 2008, the non-compliance is ignored unless it continues on or after 1 February 2008.
KiwiSaver Amendment Regulations 2008 (2008/6): exemption from regulation 7A(4) of Securities Regulations 1983
These regulations, which came into force on 1 February 2008, exempt providers of KiwiSaver schemes from regulation 7A(4) of the Securities Regulations 1983 in relation to an investment statement first distributed before 1 April 2008. The providers are exempted in respect of information that must be disclosed in an investment statement because of changes to the scheme or the securities arising from any provision of the Taxation (KiwiSaver) Act 2007. The exemption expires on 31 July 2008.
The effect of the exemption is that investment statements first distributed before 1 April 2008 need not be set out as required by regulation 7A(4). This enables providers, until 31 July 2008, to indicate the changes or corrections to investment statements required because of the Taxation (KiwiSaver) Act 2007 by way of an insert or supplement distributed with investment statements. However, information provided in the inserts or supplements must be set out in a style or format consistent with the investment statement.
KiwiSaver scheme rules
Clauses 12(2) and (3) of the KiwiSaver scheme rules (Schedule 1 of the KiwiSaver Act) have been amended to ensure that the serious illness withdrawal facility applies only when the member is permanently and totally disabled or when death is imminent. The member can then withdraw the $1,000 Crown contribution.
Clause 13 of the KiwiSaver scheme rules has been amended to ensure that applications for withdrawal on the grounds of serious illness can be made without the need to complete a statutory declaration of the assets and liabilities of the applicant. Accordingly, a statutory declaration of the member's assets and liabilities is only required for applications for withdrawal on the grounds of significant financial hardship.
Fund withdrawal tax
New section CS 10B of the Income Tax Act 2004 ensures that permitted KiwiSaver or CSF withdrawals are not subject to fund withdrawal tax.
KiwiSaver-related changes to the Tax Administration Act 1994
The definition of "tax" in section 3(1) of the Tax Administration Act (TAA) has been amended to include compulsory employer contributions to a KiwiSaver scheme or CSF from 1 April 2008.
Construction of certain provisions
Section 4A of the TAA has been amended so that a compulsory employer contribution to a KiwiSaver scheme or CSF is treated as if it were a deduction under the PAYE rules from 1 April 2008.
Keeping of business records
Section 22 of the TAA has been amended so that employers and PAYE intermediaries are required to keep records of amounts relating to employer tax credits from 1 April 2008.
Tax credit relating to KiwiSaver and CSF members: member credit form
Section 68 of the TAA has been amended from 1 April 2008 to:
- provide that the claim form must contain the tax file number "if known"; and
- allow providers to make a claim (including making a supplementary claim) to Inland Revenue for members who have had contributions deducted during the member credit year but which have not been received by providers.
Section 120B of the TAA has been amended so that a failure to pay a compulsory employer contribution does not result in a liability to pay use-of-money interest from 1 April 2008.
Section 143A (Knowledge offences) of the TAA applies when the employer fails to make compulsory employer contributions to a KiwiSaver Scheme from 1 April 2009.
Deduction of tax from payments due to defaulters
Section 157 (Taxpayer default in payment of income tax) of the TAA applies where the employer fails to make compulsory employer contributions to a KiwiSaver Scheme from 1 April 2008.
Repeal of section 216 of the KiwiSaver Act
The reference to section 216 of the KiwiSaver Act 2006 will be omitted in sections 138L(2)(ab), 183A(1)(h), 183ABA(3A) and 183D(1)(bc) of the TAA as a consequence of the repeal of that section from 1 April 2009
KiwiSaver-related changes to the Superannuation Schemes Act 1989
The definition of "participation agreement" in section 2 of the Superannuation Schemes Act has been inserted to clarify that it has the meaning as defined in section 4(1) of the KiwiSaver Act 2006. This amendment applies from the date of assent - 19 December 2007.
Dealing with applications for CSFs
Section 34 of the Superannuation Schemes Act has been amended to clarify that a person seeking approval to become a complying fund needs to provide the necessary information to satisfy the requirements set out in section35. This amendment is treated as coming into force on 1April 2007.
Forms of notice under section 37
Sections 37 and 38 have been amended to require notices to be sent to the Financial Markets Authority when there is a change in any information required to be specified in the register of CSFs. The amendments include changes to the name of the fund, changes to the trustees or changes to the financial year end of the fund. These amendments apply from 1 April 2008.
Matters to be specified in annual reports
Schedule 2 of the Superannuation Schemes Act has been amended so that a summary of amendments to the participation agreements relating to CSFs in any year must be included in the annual report. This amendment applies from 1 April 2009.
SSCWT exemption and participation agreements
An amendment has been made to section 35(1)(e) of the Superannuation Schemes Act to ensure that the CSF SSCWT exemption applies to participation agreements or schemes which replace those that were in place on 1 July 2007. However, the exemption does not apply if an employer enters into a participation agreement after 1 July 2007, if no agreement had been previously held.
Changes to the KiwiSaver Regulations 2006
The following changes came into force on the date of assent, 19 December 2007.
Regulations 6 and 7 replaced
Regulation 6 has been amended and Regulation 7 of the KiwiSaver Regulations 2006 will be revoked, as they deal with the requirement to provide an annual report and will be redundant.
Regulation 20 has been amended from the date of assent to ensure that the fee subsidy is applied according to the current investment allocation instructions that the member has elected or been allocated to (if it is a default provider).
Mortgage diversion facility
The KiwiSaver Regulations 2006 have been amended to ensure that:
- they extend to CSFs in respect of the mortgage diversion facility; and
- include within the eligibility for the first home ownership withdrawal second-chance buyers that have a determination from Housing New Zealand that they are in the same financial situation as first home buyers.
KiwiSaver-related changes to the Holidays Act 2003
The Holidays Act 2003 has been amended to explicitly exclude employer contributions to a superannuation scheme from the definition of "gross earnings", "relevant daily pay" and "ordinary weekly pay". These amendments are treated as coming into force on 17 May 2007.