RNZ's money correspondent Susan Edmunds. Photo: RNZ
Send your questions to susan.edmunds@rnz.co.nz
I have just read your answer about the superannuation not being means tested... but my dad got a phone call from Inland Revenue to say that his tax bracket was wrong because he started to earn too much. Isn't that 'means tested'?
A couple of people pointed out that I may have been a little simplistic when I told someone last week that their pension won't be affected by either their KiwiSaver or continuing to work.
New Zealand's pension is not means- or income-tested. That means, in general, you are entitled to the same amount whether you're in full time work earning $300,000 a year or completely reliant on the pension, and it doesn't matter how much money you have in the bank
(There are some foreign pensions that offset New Zealand Super, but that's probably a topic for another column.)
But, as you point out, if you are working and getting the pension, you could find that you are pushed into a higher tax bracket.
New Zealand has a marginal tax system, where you are taxed more as you earn more.
Photo: RNZ
The first $15,600 you earn each year is taxed at 10.5 percent. Then, income between $15,601 and $53,500 is taxed at 17.5 percent. Income between $53,501 and $78,100 is taxed at 30 percent and between $78,101 and $180.000 is taxed at 33 percent. Anything you earn over $180,000 is taxed at 39 percent.
That means you could end up with part of your income taxed at a higher rate if the combination of your salary and the pension pushes you into a higher bracket.
You may also find that things like KiwiSaver can affect your accommodation supplement - you can only qualify for this if you have assets as a single person of $8100, and $16,200 for a couple.
But the base level of the pension remains the same.
I am a sole trader. If I pay into my KiwiSaver from my work account, is it drawings or 'employer contribution'?
Robyn Walker, a partner at Deloitte, says because all contributions into KiwiSaver accounts are fully subject to tax, the label you put on the payment is slightly irrelevant from a tax perspective.
"That said, a sole trader is not an employee and does not employ themselves, and therefore a payment can't technically be made as an 'employer contribution'; as such the contribution should be treated as drawings and tax paid accordingly."
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