ACT Will Remove Tax On KiwiSaver Earnings
by ACT New Zealand · SCOOP“ACT will remove the tax on KiwiSaver earnings, allowing those returns to stay invested and generate savings for generations to come,” says ACT Leader David Seymour.
“Other parties want to force your money into KiwiSaver, then tax you. ACT says it should be your choice, but if you save for the future we will let you get the full benefit of compounding returns instead of taxing you every step of the way.
“Every other party at this election wants to make New Zealanders put more money into their KiwiSaver, leaving less in their back pocket to fund today’s cost of living. ACT is the only party proposing to stop taking money out of their KiwiSaver through taxes.
“New Zealand should be a country where people are encouraged to work, save, invest and build assets of their own. ACT’s changes mean more of your investment returns stay invested, and more of your money is left to compound over your working life.
“Long-term investments benefit from the magic of compound interest. Every year, a KiwiSaver account earns interest on the balance. That balance includes interest earned last year. Next year’s interest is calculated on a new balance, including interest earned this year.
“Interest on interest, year after year, grows your KiwiSaver balance exponentially. There are two ways to get a higher balance. One is to invest longer, the other is to get a higher interest rate.
“Put it this way. Over a 42-year career, a 10 per cent return could double your savings nearly six times, compared with only four times at seven per cent, leaving you with roughly three times as much at retirement. A 30 per cent tax on a 10 per cent return effectively cuts that return to seven per cent, showing how dramatically tax can reduce the power of compounding.
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“Every time you get taxed on your earnings you don’t just lose that money, but all the future savings that would be compounded from it.
“This policy would help a 20-year-old builder earning $60,000 save an extra $209,486 by the time they turn 65. A 50-year-old office manager earning $80,000 will have an extra $20,878 by the time they turn 65.
“We would also end the KiwiSaver Government Contribution for members who receive employer contributions, replacing it with the new tax treatment inside their accounts.
“A country builds wealth when more people own assets, have savings, invest in productive enterprise and have the confidence to think decades ahead.
“ACT is campaigning to unlock New Zealand’s potential by shifting power from the government departments and politicians in Wellington back to you, your family, and your business.”
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