Despite their confusing name, member tax credits have nothing to do with tax, and they aren’t really that taxing to understand either.
Here’s how they work.
Member tax credit is the name given to the money the government adds to your KiwiSaver account each year, provided you put in money as well of course. So for ease, we will call it the annual government contribution – as that’s really what it is.
So how much can you get?
For every dollar that you put into your KiwiSaver account, the government will put in 50 cents, up to a maximum of $521.43 per KiwiSaver year. Therefore to get the maximum you will have to contribute $1042.86 a year. But if you were to put in $500 a year, the government would only put in $250.
If the money deducted from your pay is less than $1042.86, and you want the full government contribution, then you can top up your account with voluntary payments. It doesn’t matter whether you are working or not; as long as someone other than your employer puts money into your account for that KiwiSaver year, the government will also make a contribution.
Who gets this annual government contribution?
To qualify for member tax credits (MTC), you must be:
- aged 18 or over
- living in New Zealand
- not yet eligible for a retirement withdrawal, currently reaching the age of 65.
Even if you don’t live in New Zealand, you may still qualify if you're in certain groups. You must be:
- a New Zealand government employee serving overseas
- working overseas as a volunteer
- working for token payment, for certain charitable organisations, if the work you’re doing meets certain conditions.
What do you mean by a KiwiSaver year?
Unlike a calendar year, a KiwiSaver year runs from July 1st to June 30th.
Here’s a tricky one. What happens if I join KiwiSaver partway through the KiwiSaver year?
If you only joined partway through a KiwiSaver year, then you won’t be eligible for the full government contribution for that year. The money you are eligible for is based on the number of days of that year you’ve been in KiwiSaver for – so if you joined, or turned 18, on the first of February for example, you would be eligible for 150 days’ worth of government contributions.
OK, so what do I have to do to get these member tax credits?
If you fit the criteria mentioned before, to receive the annual government contributions you have to put money into your KiwiSaver account – either through the money that gets deducted from your pay, or by putting in voluntary payments. You need to ensure that the money is deposited during the KiwiSaver year. So don’t leave it until the last minute to make your contribution, get your contributions in by 30 June each year.
Your KiwiSaver provider, Booster KiwiSaver will claim the money from the government for you at the end of the KiwiSaver year, each year usually in July. You will see the money in your account within a month of your KiwiSaver provider making the claim.