Post-budget legislation update – superannuation

Closure of KiwiSaver mortgage diversion facilities

As signalled in the budget announcements, amendments to the KiwiSaver Regulations 2006 came into force on 1 June 2009 which:

  • close (on and from that date) new participation in the mortgage diversion facilities of KiwiSaver schemes and complying superannuation funds; and

  • leave mortgage diversion facilities in place for those members who have requested participation from mortgagees before 1 June 2009, but only where the provider and the mortgagee choose to participate.

The new legislation provides that any non-compliance with securities-related legislation as a result of these amendments will be ignored if:

  • the non-compliance starts before 31 July 2009 and does not continue on or after 31 July 2009; or

  • it relates to either a prospectus registered, or an investment statement dated, before 1 June 2009 (the 31 July 2009 sunset date does not apply here).

The new legislation was introduced on Budget Day (28 May 2009) and received the Royal Assent the following day.

Changes to Employer’s Superannuation Contribution Tax (ESCT)

The new legislation which repealed the personal tax cuts due to take effect on 1 April 2010 and 1 April 2011, has also repealed the corresponding rate and threshold cuts for ESCT that were to take effect on those dates.

However, unlike the mortgage diversion facilities provisions referred to above (which allow for some non-compliance with securities-related legislation to be ignored), the ESCT provisions do not afford similar protections.

We have raised this matter with officials and have received email confirmation that Inland Revenue will seek to resolve this issue (with retroactive effect, we understand) at the first available opportunity.

Benefit payments on death

We share KiwiSaver providers’ ongoing concerns in relation to the cost and delay caused by the requirement in the KiwiSaver rules to await a Court-ordered grant of probate for a will (or letters of administration, in cases of intestacy) after KiwiSavers with small balances die.

Officials have advised us that they are supportive of this issue being addressed, again at the earliest opportunity.  Chapman Tripp has made written and oral submissions to the Finance and Expenditure Committee supporting the inclusion of a retroactive remedy in the Taxation Bill, which is due to be reported back to Parliament on 30 June 2009.

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Related topics: Funds, KiwiSaver & superannuation; KiwiSaver; Tax

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