The answer to this question, to use Kiwi vernacular is yeah … nah. Some KiwiSaver contributions are taxed, and so are investment returns. But KiwiSaver withdrawals are not taxed.
Tax on KiwiSaver contributions
As a KiwiSaver member you can choose to contribute either 3.5% (the default rate), 4%, 6%, 8% or 10% of your before-tax pay. These payments are not taxed directly. But you still pay tax on your entire salary.
For example, if your pre-tax salary is $1000 per week, and your chosen KiwiSaver contribution rate is 10% ($100) you will still pay income tax on the full $1000, not $900.
However your employer has to pay Employer Superannuation Contribution Tax (ESCT) on their additional contributions, which are at least 3% of your salary.
ESCT rates range from 10.5% to 39%, depending on an employee's earnings:
Employee annual income | ESCT rates |
$0 - $18,720 | 10.5% |
$18,721 - $64,200 | 17.5% |
$64,201 - $93,720 | 30% |
$93,721 - $216,000 | 33% |
$216,000+ | 39% |
Tax on KiwiSaver returns
How much your KiwiSaver is taxed depends on what kind of scheme you are in. There are two types of KiwiSaver scheme:
- Widely-held superannuation schemes
- Portfolio investment entities (PIEs)
Widely-held superannuation funds are taxed at a flat rate of 28%. However, most KiwiSaver schemes are PIEs. The tax rates on PIEs are called Prescribed Investor Rates (PIRs), which are lower than income tax rates.
The table below shows your PIR – the amount of tax you'll pay on your KiwiSaver returns – depending on your income:
Annual | Income | PIR |
$15,601-$53,500 | 17.5% | 10.5% |
$53,501-$78,100 | 30% | 17.5% |
$78,101-$180,000 | 33% | 28% |
$180,000+ | 39% | 28% |
You can work out your PIR here.
Tax on KiwiSaver withdrawals
The good news is that KiwiSaver withdrawals are not taxed.