Tax laws treat KiwiSaver ‘harshly’
KiwiSavers are being ‘‘harshly’’ taxed compared to property investors, the authors of a book designed to fire up Kiwis over tax fairness claim.
Deborah Russell, senior tax lecturer at Massey University, and tax consultant Terry Baucher release Tax and Fairness, published by BWB Texts, this week.
They claim that more than 2.7 million people in KiwiSaver are being clobbered by tax laws, while the roughly 130,000 landlords who own residential investment properties are much more lightly taxed.
The authors believe the favoured tax status of property has contributed to the price boom.
‘‘Inland Revenue estimated the gross residential rental income reported for the year to 31 March 2015 to be $2,008 million. After deducting the $701m of rental losses claimed, the net rental income returned and taxed was $1,307 million.
‘‘Assuming a 33 per cent rate for individuals and trusts, and 28 per cent for companies, this implies a tax take of about $425m, or roughly $33m less than that relating to KiwiSaver funds and superannuation schemes.’’
And yet, at the end of March there was just under $39 billion in KiwiSaver, while there was $66.5b worth of mortgages on residential properties owned by property investors, on properties that were increasing in value rapidly.
Russell and Baucher believe most people in KiwiSaver don’t understand how harshly their savings are being taxed as a result of the little-known Foreign Investment Fund (FIF) rules.
They want to dispel that ignorance, and hope their book will get the public interested in tax fairness.
‘‘As both the number of KiwiSaver members and the value of KiwiSaver funds grow, the current tax treatment appears increasingly harsh,’’ they say.
‘‘If membership is made compulsory, as has been suggested, then under present policy settings a very large and growing number of savers will be overtaxed relative to other assets.’’
Russell and Baucher hope to fire up KiwiSavers to demand the tax system be made fairer, but also to spark a national debate about whether it is finally time for the wealthy to pay tax on their capital gains.
Russell will stand as a Labour candidate in Auckland’s New Lynn electorate in the upcoming general election.