National leader Christopher Luxon wants plans to charge GST on KiwiSaver fees scrapped, saying he was getting complaints until 2am today.
Photo: RNZ / Angus Dreaver
The government intends to charge GST on fees paid on KiwiSaver accounts from April 2026, potentially netting it $225 million annually in taxes.
The proposed tax bill was introduced to Parliament yesterday to change the way the tax is applied to service fees charged by managed funds, which are currently exempt from the 15 percent goods and services tax.
Minister of Revenue David Parker said the change was made for the sake of consistency.
However, Luxon said the move was another of the government's steady stream of new taxes that were needed to pay for its high spending.
"They're addicted to spending and need to dream up whole new tax grabs and that's what this is."
He said it would have a huge impact on the long-term value of people's retirement savings.
While the tax would be applied to the service fees charged by fund managers (not the savings themselves), Luxon said there was no doubt that the value of people's retirement savings would be eaten away because the charges would be passed on.
He said people should be encouraged to move away from investing in property and put their money into the stock market and KiwiSaver.
"It doesn't make any sense and really what it is is again a government that has to dream up new taxes because it's got its spending out of control and it's delivering poor outcomes."
He said he was still receiving texts at 2am today from people saying if the legislation went ahead they would remove their funds.
"We want people to stay really invested in KiwiSaver but this doesn't help.
"We need to stop this right now and not actually let the government even implement this."
So far as any changes that National might be planning for KiwiSaver, Luxon said by the time of next year's election campaign the party would have fully costed fiscal and tax plans.
"It doesn't make any sense" - National leader Christopher Luxon
Revenue Minister David Parker told Morning Report much of the reporting around the change was incorrect.
"There's a lot of misinformation in the media today suggesting that we're charging GST on KiwiSaver contributions. We're not.
"We are proposing to close the loophole whereby some KiwiSaver service providers claim back a lot of the GST they incur from subcontractors where others don't."
Revenue Minister David Parker is defending the new bill. Photo: RNZ / Angus Dreaver
The ones that are doing this were generally the biggest ones, owned by Australian banks, Parker said.
"They're exploiting a loophole that others aren't and as a consequence they're not paying GST in accordance with what we think are underlying GST principles."
Providers who were doing the right thing were suffering a "competitive disadvantage" due to the biggest providers who were using the loophole, he said.
"What we're doing here aligns with what already happens in Australia," which has a similar GST system, he said.
"What we're doing here aligns with what already happens in Australia" - Revenue Minister David Parker
'We're asking the government to rethink it'
Financial Services Council chief executive Richard Klipin said new GST legislation would impose a huge cost on KiwiSaver funds.
Klipin told Morning Report the system was built to support New Zealanders' retirement - not the tax system.
"We're disappointed and we've obviously called it a sub-optimal outcome.
"We're asking the government to rethink it and re-consult."
"The more you tax it the less it will become fit for purpose" - Financial Services Council chief executive Richard Klipin
Klipin noted KiwiSaver, which started in 2007, was still a relatively young system.
"The more you tinker with it and the more you tax it the less it will become fit for purpose.
"Let's be really clear about what the purpose of KiwiSaver is, let's make sure that any changes we make actually benefit people in the system rather than benefit the tax system."
Kernel Wealth chief executive Dean Anderson told Morning Report many people were still unsure about what KiwiSaver was and one in five did not know who their provider was.
"Rather than applying new taxes to the scheme, why are we not looking at ways to incentivise people to put more into their KiwiSaver so they have a better nest egg for their retirement?"
Anderson said there were already fees and tax on KiwiSaver eating into the returns Kiwis have to live off when they reach retirement.
He said people should be encouraged to join the scheme - but tax changes could scare them away.
"This isn't GST on their KiwiSaver contributions or on their KiwiSaver balance, it is GST on the management fees they pay, and those management fees can range from a quarter of a percent up to sort of 1.5 percent.
"So it's the GST on that amount, so it does for most people sound like very small fractions of a percent, and it is. But over time that does compound, particularly over a period of 20, 30, 40 years.
"And for investors, that will mean you have maybe a thousand or even tens of thousands of dollars less in your balance, and we probably won't even know that that's happened."
"This is creating a lot of confusion" - Kernel Wealth chief executive Derek Anderson
Anderson said a worry was that people would lose confidence in KiwiSaver.
"If you go and look at social media today, many people are thinking this is a direct tax on their investment in KiwiSaver .... This is creating a lot of confusion, as a result of confusion people lose confidence.
"If we don't build confidence in this, there will be sectors and community groups who don't get the full benefits of what KiwiSaver can do for them and they'll continue to be marginalised at times."
Luxon on immigration numbers
Asked about the industrial dispute at the Kawerau mill which has led the international owner to threaten to take legal action seeking damages from the union, Luxon said he was not party to those negotiations.
The bigger issue was that the government did not have a plan to handle inflation and the cost of living crisis and was also making a poor fist of immigration settings.
He said every sector and every region was crying out for more labour.
Asked if he would increase immigration to 50,000 a year - similar to four or five years ago - he said he wanted to see a situation where businesses were not constrained by a bottleneck in immigration.
The government had in effect shut down immigration and had been slow to start it up again since the pandemic eased.
This was in contrast to Australia where working holiday visas as an example had been pushed actively for around nine months.
"Out there in the real world with all the other countries New Zealand is not top of mind anymore and we have to establish it in that way."