New Zealand: Personal Taxation
Social Security Taxes
Social security, or “government transfers”, is largely non-contributory in New Zealand, and neither employees nor employers make contributions. Unemployment, sickness benefits and pensions (superannuation), for example, are available to all residents irrespective of their employment history, although there may be other eligibility criteria and means testing.
Benefits are normally paid only after a minimum period of residence. Unemployment benefit is available only after two years, and superannuation usually after 10 years’ residence.
All employees must contribute to the Accident Compensation Corporation (ACC) scheme, which provides compensation in the event of an accident, either at work or elsewhere. ACC contributions are, from April 1, 2012, deducted from salaries at the rate of NZD1.44 per NZD100 of liable earnings (the rates are usually reviewed annually).
KiwiSaver is available as a voluntary means of saving for retirement. Contributions are deducted from a person’s salary at the chosen rate of 2% (rising to 3% from 1 April 2013), 4% or 8%, and invested in a KiwiSaver scheme. If a person is self-employed, the rate of contribution is agreed with the KiwiSaver provider, and payments are made directly to them.
The government makes a NZD1,000 tax-free contribution at the start of a person’s KiwiSaver account, and contributes 50% of an individual's annual contribution up to a maximum of NZD521.43 each year (NZD1,042.86 prior to July 2011). Employers also have to contribute an amount equal to 2% of a person’s annual contributions.
KiwiSaver savings are generally locked in until the age of eligibility for New Zealand superannuation (currently 65), but early withdrawal of part (or all) of the savings can be available, for example, when a person is buying a first home or moving overseas permanently.