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The New Zealand Super Fund will begin contributing to Crown coffers from next year as its tax bill outgrows taxpayer contributions

Public Policy / news
The New Zealand Super Fund will begin contributing to Crown coffers from next year as its tax bill outgrows taxpayer contributions
[updated]
National Party finance spokesperson Nicola Willis
National Party deputy leader and finance spokesperson Nicola Willis in Parliament

Finance Minister Nicola Willis has asked officials for advice on whether to make the New Zealand Super Fund tax exempt, as its annual bill begins to outgrow Crown contributions. 

In the 2024 fiscal year, the Super Fund paid $1.5 billion in tax after achieving a 15% return, which increased the value of its assets to $76.6 billion. 

This was a strong result for the world-beating sovereign wealth fund. Since 2003, it has added roughly $50 billion of value to a $26.5 billion contribution from taxpayers. This money will be used to help pay for superannuation starting in 2034. 

But by then, the Government’s net contributions to the fund will have fallen to just $6.9 billion, according to the Treasury, as taxes effectively claw back most of the money given to it. 

The Crown has contributed a net $16.9 billion to the Super Fund when accounting for the $9.6 billion it has paid back in taxes in the past two decades. 

Jo Townsend, the Guardians of the New Zealand Super Fund’s new chief executive, said the taxpayers' net contribution during the year ended June 2024 was only $100 million.

“Based on the current modelling, that is effectively expected to switch into net negative tax contributions in the year going forward,” she said

Free the fund 

Townsend said it was for the government to choose the net contribution rate. However, there were cost savings and efficiencies which could be realised if the NZ Super Fund were tax-exempt.

The fund has to sell long-term assets to pay each annual tax bill which comes with transaction and opportunity costs which were ultimately paid by taxpayers and could be avoided.

In theory, Willis could exempt the sovereign wealth fund from paying tax and adjust the contribution rate to minimise any impact on the Crown’s day-to-day finances.

The Guardians of the New Zealand Super Fund asked for this to be considered in its briefing to the incoming minister after the 2023 election. It was also one of many recommendations made by the Tax Working Group in 2019, which described its tax status as an “oddity”. 

On Tuesday, Willis confirmed she had asked officials for fresh advice on the tax status of the Super Fund and was expecting to hear back in the next few months.

Barbara Edmonds, the Labour Party’s finance spokesperson, said she had discussed the issue with the Guardians of the New Zealand Super Fund several times.

If elected Finance Minister, she would review the contribution rate and would lean towards making the fund tax exempt — after taking advice.

Fiscal implications 

The Guardian’s have argued transfers between the Super Fund and the Crown are fiscally neutral as its assets are already counted on the Crown balance sheet.

However, there are implications for what can then be done with that money and on politically important fiscal indicators. Crown contributions are funded from the annual operating allowance and crowds out other spending priorities or gross debt repayments.

Willis has also opted to set a net core Crown debt target in her fiscal plan. This measure excludes the Super Fund and would improve if assets were sold to pay down core debt. 

These are the two indicators used to demonstrate the Coalition Government’s fiscal position and judge their performance as stewards of taxpayer money. They are politically and practically important, even if the overall balance sheet isn’t affected. 

One reason why the Super Fund was given tax obligations was to provide governments with some flexibility to manage the short-term fiscal implications of filling up the fund. 

A government can opt to suspend contributions and effectively withdraw money from the fund to bolster the operating balance, or pay down debt elsewhere on the balance sheet. 

The previous National Government did this in 2009 to improve some fiscal indicators during the recession and contributions were not resumed until Labour was elected in 2017.

Guardians of NZ Super said in their briefing to Willis this was still possible but “inconsistent with the intergenerational purpose of the Fund and with the express intent of the Act”.

Willis has previously said she doesn’t plan to stop contributions, despite being in a tight financial spot. However, the balance between taxes and contributions means the Crown will begin withdrawing small amounts of money from the fund starting next year.

Benchmark beaten

Whether that's a feature or a flaw is likely what Willis has been seeking advice on. It’s essentially a choice between saving more for the future or pulling back some funds to address immediate needs.

To date, saving money in the Super Fund has paid a handsome dividend. It has averaged a 10% return over the past 20 years and outperformed Treasury bills, a measure of risk-free returns, by 6.5% each year. 

This year, it beat that risk-free benchmark by 9.33% or $6.3 billion, even though it marginally underperformed its passive reference portfolio — which was driven by huge returns among a handful of US tech stocks.

Treasury and the Minister of Finance arrange an independent performance review of the Super Fund every five years. The most recent report was tabled in Parliament on Tuesday. 

It found the fund had an exceptional investment process and was still outstanding among its global peers. However, it also noted it would need to be ready for change in the next five years, with new leadership still settling in and likely headwinds in capital markets globally.

Townsend said the reviewer’s feedback would be “front of mind” as it scaled up the fund over the coming years. Treasury projects that by 2044, the fund will be worth over $200 billion.

At that point, it is expected to contribute $1 billion annually towards pensions and pay $4 billion in taxes.

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120 Comments

It is absurd that the NZ Superannuation Fund pays tax. And it is folly that 'the Government can opt to suspend contributions and effectively withdraw money from the fund to cover short-term expenses'.
The NZSF is vital to provide for superannuation in the future to the rapidly growing cohort of over-65s. Contributions to it need to be hugely increased, from the proceeds of introducing a capital gains tax, and reintroducing inheritance tax and gift tax.
The $1 billion a year being dished out in $521 state subsidies to private KiwiSaver funds ought also to be going into the NZSF instead.

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The $1 billion a year being dished out in $521 state subsidies to private KiwiSaver funds ought also to be going into the NZSF instead.

Why not first worry about the $1b+ a year being dished out to superannuants who haven't actually retired and are earning in excess of $100k p.a.? 

Then we can have a conversation about this Kiwisaver state subsidy.  

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"Why not first worry about the $1b+ a year being dished out to superannuants who haven't actually retired and are earning in excess of $100k p.a.? "

Yep, worry about the people who are actually personally funding both their own Super as well as others. What's wrong with this picture?

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What's wrong with this picture is providing welfare payments to people earning well over the average wage.

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Yes, the Government must reimpose some form of the surtax on all other income of superannuation welfare beneficiaries that Winston Peters opportunistically persuaded National to abolish in 1998.
https://www.auckland.ac.nz/assets/business/about/our-research/research-…

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So are we gonna do that with WFFTC as well? 

Because if I'm being told I have to save squillions for retirement to cover long-term inflation, the deal can't be that after a life-time of covering footing the bill for everyone else's retirement, I'm suddenly on my own when it's my turn to step back from the workforce. 

We don't have the kind of super schemes and disposable income to just suddenly find the equivalent value of Super a week in retirement - elder milennials are now over half-way through their working lives. 

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I thought working for families was income tested? High earners get a lot less than low earners, quite different to super.

You've misinterpreted the rest of my comment. I'm saying if you decide to work past 65, and earn a sufficiently high income (another poster suggested 100k as an example), you can't also claim super. Once you quit or downside work, you can claim again.

I would probably go further and ask for means testing so we're not supporting people that are quite capable of supporting themselves, but that's a separate discussion.

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I would suggest a new tax code for people who receive Super, (such as the Student Loan one, M-SL) which takes an extra bit of tax on income earned.

You could set the rates to only kick in at a certain income level and make it so that someone earning over say $100k while receiving Super effectively paid for their Super with increased tax. 

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It is 'income tested' but if you have a bigger family, that threshold gets higher and higher. 

It's eiminently relevant to an argument that just focuses on household income, without the bigger picture. 

I'm more open to the idea of 'active employment' being the driver for super eligibility for this reason, rather than any other income you may have passively, otherwise it basically becomes a reward for those who and spent down their savings instead of investing over the course of their career. 

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I disagree - those people even after receiving national super, are still net taxpayers.

 

Picking up on the main thrust of this article, an alternative approach would be to give these people a huge tax credit for not taking National Super.  

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Which is an excellent idea.....and would be exactly the same as the  65+ person working and paying their full amount of tax and receiving super like everyone else, except they would still be contributing, and the retired folk not working would not. Most of those still working (in a professional capacity mostly), would also not be so much of a burden on the health sector, which is another cost saving positive.

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Only an excellent idea to those determined to be blind to the fact that NZ Superannuation is a social welfare benefit established to ensure that New Zealand doesn't have a regiment of starving agèd poor dying in the streets. It was not designed to be icing on the cake of amassed personal savings.

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Well I guess you should go tell all the financial advisors that have their clients saving habits geared to their super entitlement being the cherry on the top For their retirement after years of saving and planning based on that advice. I do believe that the government also actively encourage this practise, along with working as long as you can. So I think your miles down a rabbit hole with this thinking they it will suddenly change and retired folk will be punished for doing what they have been encouraged to do for as along as can remember. Just won’t happen. Go find savings somewhere else….you are wasting your time arguing for change here. You have a government in place here that does not agree with you, and will be in place For likely 10+ years longer. Any future labour government would not be elected going down this path. Higher retirement age, maybe, and that is sensible, but no one can even agree on that. So punitive measures. No chance. Sorry.

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It will happen as Super becomes less and less affordable, and younger generations take the reigns of power. The sooner changes are made, the less dramatic they will be. 

This is one of those situations where simply giving up that cherry could mean that future governments don't come back for helpings of the cake itself. 

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Once, again, you're wrong - it was DESIGNED to be universal since the mid 1970s.  The concept of it being designed to sustain those without any other means refers to a time before any of us were alive and if you want to go back to to those days, it'd need to be done in not less than 100 years' time

 

 

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Exactly, this is a labour type idea where they know they are right, and they do it, and everything turns to custard and they step back and go whoops….look for someone else to blame, get kicked out and whatever they did is reversed and put back in working order.

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By that logic why can I not receive a working for families tax credit or a Jobseekers benefit?  I'm regularly on seek looking at jobs.  

I would be personally funding my own as well as others, it seems awfully unfair to penalize my family for paying a lot of tax.  

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Each scheme is a transfer from one person to another person via the state and each scheme has its own specified eligibility criteria, which is a way to ration state subsidies so they are affordable.  The point of National Super v any other benefit is eligibility is set according to age only.

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Agree and, these people are through their taxes paying tax for superannuation today; setting funds aside for their personal retirement scheme (Kiwisaver) AND making contributions to the NZ Super Fund, so the moral argument to apply a means test starts to crumble after 2035.

 

Anyone who advocates for a means test / surtax to be applied to these people is full of envy.  

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Why are you assuming that those of us arguing for means testing would not be effected by it? I am arguing for policies that would see me receive zero support in my old age, because I won't need it and don't think that the worse off in society should suffer to further pad my retirement. 

Regardless of your own thought process, some people are able to take broader social arguments into consideration rather than pure self-interest. 

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It's you that are assuming your choices should be imposed on others.  If you don't want to pick up National Super when you're eligible, fine.  That's your choice.  I'll definitely have my hand out if I live that long, even though I'm a multi-millionaire.  I'd like to decide who or what I support with my money rather than let you decide I shouldn't have such a choice.  

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I'd love to be comfortable enough to not have to worry about self-interest.

But some people are able to look beyond their own circumstances and not project those onto other people in a bid to feel superior about what they think and understand that revoking a major social contract halfway through people's working lives is going to go down like a cup of cold sick with many people currently working today.  

 

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I'd like to add, that I understand you believe the cost of universal national super is unsustainable and funding it removes the ability of the state to purchase other services that are targeted to meet social need(s).  That view is well founded given the pay-as-you-go funding model for it and that the cost will impinge on state funding priorities being expanded into other areas (e.g. Health and Education).  Unfortunately for your view (that it should be means tested), the Cullen Fund works against that.  Sure; the Cullen Fund wont fully fund National Super costs when it starts to make contributions in 2035.  But as I'm being forced to pay into it, I'll want to get my money back when I'm eligible.

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'Why not first worry about the $1b+ a year being dished out to superannuants who haven't actually retired and are earning in excess of $100k p.a.?'

A different discussion, but yes, the Government must reimpose some form of the surtax on all other income of superannuation welfare beneficiaries that Winston Peters opportunistically persuaded National to abolish in 1998.
https://www.auckland.ac.nz/assets/business/about/our-research/research-…

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Those kind of changes need to be signposted a generation in advance or else they create massive equity issues; particularly for a generation that's had to pay more for housing and in costs to raise a family than any other in NZ history. 

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When I get retirement age, it’s likely I’ll be earning in excess of 300k per year (from salary). The problem with retirement is some people get bored (that’s likely to be me), and so continue working either full or part time. Some people have to keep doing things. If I’m in that situation and choose to continue to work, I’ll take the super too. Reality is I will be paying 120k in tax on that, and receiving 30-40k back. Seems like a sweet deal for the tax man. The alternative is I quit, take the super, and start burdening the Health system due to not being active any more (with associates health issues). People that work past 65 should be encouraged if they are net tax payers.

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What happens to your $300k per year salaried job?  Does it just disappear when you retire?

A sweet deal for the tax man would be receiving $120k in tax and not having to fork out $40k in the process, much like how it's set up in Australia.  

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You don't think it's reasonable for a couple of average wage earners to see their entire tax contribution used as an incentive for averagejoe to stay in the workforce? 

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100% of 0 is 0. If I left the workforce there would be a cost, if I didn't there wouldn't. Simple math.

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Interesting logic. I will write to my MP saying I'm going to quit my job if they don't send me $20k a year, I'm sure they will see that it's a sensible decision. 

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While they wait 10 - 20 years for averagejoe to eventually drop dead so they can get that promotion, carrying the slack of his cognitive decline and inability to keep up with basic tech tasks like editing a spreadsheet.  

We wonder why young people are leaving the country.  

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Its a pretty "sweat deal" for you though, when you compare it to someone who earns the same but isn't old enough for Super?

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We all get super.

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Not anyone under 65 is what I meant. Why do you think that just because you are over 65 does it mean that it is fair for you to effectively pay $40k less tax that someone earning the same who is 61?

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It's as huttman says below. Everyone who gets to 65 or whatever the retirement age is gets the same super payment. It is pretty simple. You guys are arguing that if you can work and do, then you should be punished by losing the super you contributed to. That's a crazy idea. Sorry. Yes, it is fair that I would pay 40K less tax effectively than someone who is 61, as they have not reached retirement age so that is blindingly obvious. Go to WINZ when you are 61 and try collect super, see what happens, and tell them it is not fair. 

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Funny how different people have different definitions of crazy. For me, I think that a resource-constrained government would be crazy to subsidise the income of someone earning $300k. 

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It would call it bloated. There is huge waste and money to be saved that can easily pay for super. Some would rather pick on old people and leave the mess in place it seems.

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Happy to reduce waste as well. Near the top of that list is giving Super to people who don't need it to achieve an above-average lifestyle. 

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That is if you consider 65 to be old. Most 65 year olds I know are capable of work, doesn’t that imply the arbitrarily selected age is wrong? 

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It's not a subsidy; the payee is simply being given a tax credit (they're net tax payers, after all), and part of it is being funded from payments that they paid before they reached age of eligibility. There is an equity principle at stake when everyone is required to contribute to the Cullen Fund when at the same time they're told it will be a universal regime; and afterwards to change the rules and deny them the facility to withdraw what they put in.  

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What someone earns is largely irrelevant.  Someone might have significant assets but not earn every much (once again, that goes back tot he original pension scheme).  If you argue for changing the eligibility of National Super, I'd presume you'd favour a regime rather like the resthome care subsidy that considers income and assets.   

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losing the super you contributed to

That was paying for your parents super Averagejoe ..you have not funder YOUR super over your lifetime?

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That is the problem others identify on a $300k salary and "...and choose to continue to work, I’ll take the super too". So you would likely squeal when the government impinges on your freedoms and right to choose but you lack the integrity and apply for the pension when you don't need it? I'll admit I am assuming you are smart enough to have save a significant portion of your income and have quite a nest egg.

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It's not the fact that they've applied for it, go for gold.  If I reach retirement age and it's there I will apply for it too. I am happy to be called a hypocrite, but I'm not a moron and if the money is there for the taking (for everyone) then I will take it and just pass it on to my children

But I won't hold this entitlement mentality that I am deserving of it and will still be of the belief that it should be tested.  This generation wide mentality is where the crux of the issue is, and why things won't change in the short term.  

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So...using that logic I am guessing when you get paid, you look at your pay slip and think about whether you actually deserve it or not, and give some of it away....no, I didn't think so.

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Some of us do...surely earning as much as you do you give a decent amount to charity? I aim for 10% of after-tax pay myself. 

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You don't know how much I earn, and I have 20-30 years to go till retirement age so it is an assumed figure in 20-30 years.  To answer your question, no, I don't give to charity. I pay taxes. I hear too many stories about charities that simply collect money and pay enormous salaries to the CEO or however else and no much is left to actually give away. So, maybe some direct giving, but not to charities, no. To much corruption involved there.

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It's a shame you've become jaded, and you're right I don't know your current income.

I give automatically to effective altruism NZ and trust the money will go to good, well researched causes. I expect to save a life every year or two. Other than that, I give to local environmental groups like the Native Forest Restoration Trust, Hinewai, the Summit Road Society, trapping networks etc. 

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I give to a charity I set up so I can be confident the funds are used for purposes that I support

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Except that NZ Superannuation is social welfare benefit, not an entitlement. If you choose to give up your $300,000 a year to get your $30,000 a year in NZ Super, that's okay. However, I think any surtax on superannuitants would be tailored to encourage continued work; though I doubt the tailoring would indulge $300k.

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A social welfare benefit is also an entitlement.  Irrespective of whatever benefit you choose; when you meet the eligibility threshold; it becomes an entitlement.  Similarly, when I go to work; my employment contract outlines my entitlements.

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Means testing is too hard. Do you include assets as well as income? Do you include the family home? If not how is that fair to renters? 

Just raise the age to 70 and have an easily obtained benefit for 65-70 year olds not able to work. The main reason we are having this discussion is because way too many people are still able to work at 65. 

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Its done easily enough for all other benefits for those things.

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Income and savings are different to assets when testing. 

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Call it what it is; an envy tax. But as these higher income earners are paying tax into the Superfund; there is no moral justification for denying their Superannuation entitlements after 2035 when the Cullen Fund starts to fund the cost of National Super.

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they receive the NZ super, working or not, rich or poor, because they've paid long enough in taxes.  that's the promise from the state. 

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No it isn't. There is no requirement to have contributed any tax whatsoever to qualify for Super. This is just an attempt to justify the status quo. 

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I would argue those who contributed are much more entitled, and those that freeloaded their whole lives are not entitled. But that is how the system is, it must be fair to everyone in old age regardless of whether you shirked your social responsibility or not.

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Perhaps we're looking at the difference between equity and equality. You want an equal system where everyone gets the same, regardless of need. I would prefer an equitable system where scarce government resources go to those who actually need them. 

Funnily enough, all of our other welfare payments roughly follow the 'equitable' system - you get them when you need them, if you need them. It's only Super that has no requirements to prove your need, in any way. I just want to bring it in line. What makes it different in your mind? 

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It's funny how a country such as Australia that does not have the same resource scarcity as ours, still finds it worthwhile both income and asset testing their Government pension.  

We have a Nordic style Government Super but haven't had the high level of tax burden to fund it.  I don't want high taxes, and I don't want a Nordic style Super either.  

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Australia balances that by having a tax treatment on retirement investments that is logical and sane, where as are blindly clipping the ticket every way can imagine and writing off any opposition or suggestion we do things better was not being 'fair' - whatever that means.

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I would argue those who contributed are much more entitled, and those that freeloaded their whole lives are not entitled

Yet those who receive super, keep working, also received free tertiary study, a reduction in tax rates across their lifetime, reduction in real interest rates allowing vast wealth to be accumulated through property assets, yet still complain when there's any possibility of super being addressed for those who have, through all of the above, enough wealth and income to live very comfortably in retirement without super. They likely also claim winter energy supplement and rates rebates as well as various discounts all round.

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Wouldn't this be kind of cutting your throat to spite your face. 

The way I see it (and I'm far from retirement age) is that if they are getting the supper whether they are still working or not, society is better off with them still working as this means they're still contributing to the tax take. If all over 65s stopped working I suspect it would have a noticeable affect national tax revenue so why would this be what we what to encourage. I'd want our decision makers to acts in the best interests of society as a whole not one that an emotional or purely ideological position damned what the evidence indicated what's best.

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So what you're saying is the over 65s who are working, are the best people for the jobs, and if they retired nobody would be able to replace them?  The jobs only exist because of the individual, not due to the market need?  

They better not die then because society will collapse.  

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Can I get the jobseekers benefit when I am working then?

If I have to quit my job just to get it, then that is dis-incentivising me from working.

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No. I think you need to be unemployed and/or not be able to get a job to get the jobseekers benefit. Retirement is a little bit different. You generally work for 45 years before retiring (well most do). Being unemployed is a bit different.

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Re-read the thread for the context of my comment.

The argument was if we stop paying the oldies their super if they work, then the oldies will stop working just to get the super. Well 40 year olds don't just quit their jobs because the jobseeker benefit is waiting for them if they do. Why would old people be more likely to make that decision?

Superannuation is a benefit only available to oldies. Paying them that while they are also working so dont actually need the money is not a good use of taxpayer money.

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I guess you can argue that until you are blue in the face. But the fact remains, this is the system, they are the rules. People live by them and are advised by an army of financial advisors to build a next egg, to supplement super, and work as long as you can. That’s how it is. You have zero change of changing that. Constant moaning about receiving what everyone else gets is frankly, a waste of time. 

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40 year olds don't just quit their jobs because the jobseeker benefit is waiting for them if they do.

Precisely. One doesn't give up a reasonable income for peanuts or they forego their standard of living, hence the need for super to be for those that need it, not those that don't. Just like the argument for capital flight, only some would leave and the rest would deal with it. Trying to argue toe wealthy are too smart and can just avoid everything with lawyers and accountants is folly. Some will, and loopholes can be addressed to stem this either in advance or after policy change to stem the avoidance.

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I think you're focusing on one particular issue that's being promoted by people who want to means test the eligibility for national super and missing the point of why they hold that view. 

Some would argue if you're working, you shouldn't receive National Super.  This leads down a slippery slope; from stopping national Super for people who work, to people who can work.  Why?  Because some people would like to have the state fund other activities and services and the things they support are frustrated by the opportunity cost / rivalness of a universal national super.  

Another issue is that some people may choose not to work, but yet have substantial means.  Once again, fans of means testing would like to exclude such people from receiving National Super.  

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Why are you 'worried' about people who, in the circumstances you describe, are actually net taxpayers?  If someone is earning (at least) $100,000,  and also collecting their superannuation because they are eligible / entitled, they will be paying more in tax than they're receiving from the National Super.  Aside from that, it can be assumed they're contributing skills and significantly boosting the economy from their efforts, which as the population ages will be increasingly important.

In short, there's nothing to  worry about and a lot to celebrate and honour with those people.  

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Because as a net taxpayer myself earning over $100k p.a. I want to see my tax dollars spent wisely.  I don't see anything wise about handing out billions of dollars to people who don't need it.  Certainly not when we've been handed a country suffering from a huge underinvestment in infrastructure that's decades in the making, while these retirees crow about how they've built the country and are deserving of a retirement "bonus".

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But we just saw a bunch of fools that everyone seemed to think were terrific (Labour) piss away 100B and get nothing in return. No one seemed to complain about that. 

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Have you been living under a rock?  People have been complaining about it ever since they did it.  

The fact that Labour were spendthrift does not change the fact that we have an extremely wasteful old person's benefit.  

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Some people complained. Others just screamed free money YAY. Now they complain that there is no more free money, and they wonder whether they can have everyone else's) No, we don't have a wasteful super scheme. We have a simple, universal super scheme. It's not nearly enough, but it's purpose is not to make you wealthy enough to have a super comfortable retirement. That bit is on you.

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Tax tax with taxed tax from tax payers

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Its not absurd. Stealing from an already financially unviable pension system to give to landlords is perfectly rational if you are a landlord or a proxy acting at the behest of landlords. 

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What are you talking about?

The pension isn't 'unviable'.  A universal scheme is costly; that's why the payment rates are so low.  But the main article doesnt refer to landlords, so why have you brought it up?

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It's not folly.  What is folly is to have inconsistencies in tax treatments.  Other superannuation funds are taxed, so why would this be different?  The answer lies in the fact that taxes are being used to increase the fund, which is paying tax so there's a circular feed-back loop that isn't efficient.  As the tax paid by the Fund closes on the taxpayer funds going into it, it becomes close to being fiscally neutral to make it tax-exempt.

 

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Your suggestion to remove the $521 pa subsidy is rather close to Act's policy that such a subsidy only be paid to people who make extra payments into their Kiwisaver.  

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Should Govt be collecting a huge pile of company shares and financial assets in the hope that they will be able to turn those shares into nurses, old folks' holidays, care workers, residential homes, hospitals, and Wurthers Orignals in the future?

Won't it be highly inflationary to liquidate those assets to pay for services (etc) in the future? How will we make space in the economy to accommodate the additional demand that will be driven by the release of all of the 'savings'?

Would it not make a whole lot more sense to invest now in building the stuff we need to make health and care affordable and good in the future? And, in the future, when we need to dedicate more of the country's productive capacity to meeting the needs of older people, could we not use taxation to free up the real resources we need?

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I think we ought to be building the infrastructure of hospitals and geriatriums now out of current taxation. But given the predictions of ever more over-65 welfare beneficiaries and fewer tax-paying workers, it seems essential to build a sovereign wealth fund from which to make future Super payments.

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Have you considered the impact of ever increasing sums being paid into equity markets that are largely stagnant in terms of output?

It has the same impact as ever increasing credit on RE...higher 'values' but no increased availability.

Some may describe it as a ponzi.

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But you also argue for stringent means testing.  We wouldn't need the Cullen Fund if there was a means test; we could lower taxes generally and enable people to put more into their private pension funds.  It's grossly inequitable to force people to pay into a scheme and then deny them the ability to benefit from it when they expect to access it.  It's inconsistent to support enforced contributions to the Cullen Fund and also support a means test for people who expect to draw from it after 2035.

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Let’s all remember that John Key and Bill English thought it would be silly to borrow money to invest into the fund.

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That depends on the cost of borrowing (sovereign debt) vs the return.

English & Key were making a political statement against  the "Cullen Fund" rather than a valid economic argument 

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Ohoo a grand political statement that cost kiwis dearly ..

 

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Seems to be a National speciality.

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Party of treason.

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And Ron Muldoon's worst decision by a NZ Government ever.

Willis will take the tax...the economy nose dive requires it as the tax take shrinks.

At least we will have a new road North.

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When you adjust for risk that hindsight view might seem less compelling. 

It's akin to being unable to pay your bills without borrowing and using some of that borroed money to punt on the sharemarket. 

Meanwhile the Fund is pretty much a protected empire, no competition from the private sector and little risk of losing your job unless the politicians close it down. 

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Also...should Iwi and business hidden in Church Trusts pay tax....?

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Yes. 

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Yes. So-called charities are a rort. Tax them all.

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Definitely

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I definitely support removing special (lower) tax rates for Iwi.  Article 3 of the Treaty applies.

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No tax.

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I posted a day or two ago about this fund being taxed and providing millions and possibly even between  $1bill with a high figure of $2bill. It was a guesstimate so I'm glad to see Dan providing the actual figure. Those who say it shouldn't be taxed where is the $1.5bill going to come from? Funny this some of this amount is achieved via the FIF and fair dividend rule on many shares with unrealised capital gains. Let's have unrealised capital gains on rental houses taxed as well. After all they are an investment. Funny that many people opposed to that. I wonder why.

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Capital gains tax on all property including the family home needs to be introduced in exchange for a reduction in income tax, but only on the realised gains from selling.

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#don'tsell. Tax take is very patchy. Universal land tax is better for regulation tax cashflow in every way.

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I agree. Universal tax on unimproved land value can easily be added to existing rates bill, and collected regularly at no extra cost to the state; important for building infrastructure and running the country now.
But capital gains tax on sale, no matter how patchy and lumpy, can make an important long-term contribution to the NZ Superannuation Fund, where patchiness doesn't matter.

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Sets up structure for all property to be owned by company, that is owned by trust. and obviewscate beneficiaries = never gets sold so never pays any tax. To much scope for avoidance.

Query - if we really need the tax, and it looks like we increasingly do, why is a capital gains tax superior to a land tax....?

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No one has been able to explain to me how a land tax levied at the same rate won't just end up in a huge spike of extra tax for city-dwellers and a massive transfer to those who live rurally, regardless of how efficient that land might already be being used. 

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That might not be the pertinent question GV.  Would it be better or worse than the status quo?

That said, I'm not sure your assumption is correct anyway.  Have you not seen the valuations on farms lately?  The young are equally locked out rurally - all land needs to come down in price in my opinion.

Places like Auckland have long had peppercorn local rates compared to smaller districts that often don't get as many services - so there is a good reason they have lower land values on a sqm basis, but that doesn't mean there is inbuilt unfairness. 

Aucklanders could choose to pay what they were 10 years ago for property and see their land tax fall relative to elsewhere.  Whether they do that or not is entirely up to them and not a fairness issue, heck, if it's so unfair then why not move like many current citizens are being 'forced' to do.

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Parker doesn't think so; he want to tax the appreciation in value of held assets - he doesn't want to wait for the assets to be sold before extracting money from people to spend on some other socialists project (UBI, perhaps?).

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It's crazy we have a wealth tax on shares but not on land. PIEs effectively pay 1.4% tax on foreign investments due to FIF (FDR). We pretend problem solving activity is just as legitimate as rent-seeking behaviour. There should be a 1% tax on land at the very least. Own $1M you pay $10k which is still far less than a salary.

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That tax rate is going to have to be higher in the provinces or else it's not going to work. The mechanics of land allocation in Auckland are so broken that a postage-stamp sized section for a town-house or duplex is valued at the same price as a lifestyle block on the Coromandel.  

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How do you think the values are arrived at?

Do you think the prices paid on recent sales have a large effect as I do?  If so, the buyers and sellers are free to set the land value as they see fit irrespective of the 'mechanics of land allocation in Auckland'. 

I'm yet to meet and Aucklander that wanted to pay the same rates that the equivalent house pays in Gore...

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Because I'm not going to be buying and selling my land in Auckland, so presumably it would be the same valuation systems we have in Auckland that tells me my bit of a duplex on a tiny section is worth 75% of the building's value, and that value is more than the outright purchase price in some other parts of the country. 

If my land is being used efficiently, it shouldn't result in me paying more tax than someone else with a similar sized piece of land in another part of the country. 

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If my land is being used efficiently, it shouldn't result in me paying more tax than someone else with a similar sized piece of land in another part of the country.

It may, for example, location plays a part in value.  Same house and land size, one with sea views and one without - they will have a different value. 

Use isn't he sole decider in value and nor do I see why you'd expect it to be.

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I'm not going to be buying and selling my land in Auckland, so presumably it would be the same valuation systems we have in Auckland that tells me my bit of a duplex on a tiny section is worth 75% of the building's value

You may not, but others will buy and sell, those transactions will change the value of your land whether you like it or not.  Once they do, that land value will change and with it the amount of land tax due via the valuation systems you mention.  As I said, how much you pay relative to other parts of the country is up to your fellow Aucklanders and not some conspiracy to make Aucklanders pay more.  If Aucklanders pay more, it will be because the majority voted to do so with their own wallets.

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What concerns me about the quality of comments here is the superficiality expressed by the anti-Boomer attitude and the general lack of understanding and questioning of the purpose of the Super Fund and tax it self.

First up the Super Fund was set up to provide an investment vehicle to fund retirement income for retirees. As I understand it, the income of those sources is still taxed by the Government. Taxing the Super Fund itself is effectively two bites at that cherry.

Secondly we should be asking what the purpose of tax is in today's economy. For all intents it is to manage the total amount of money in circulation. The Government's position that they have to tax to spend is utter BS, and the worst kind of lie from a politician. Luxon repeatedly makes the point that he wants to get the economy moving. That can only be achieved through putting money into peoples hands for them to spend, as surplus income. Taxing retirement income undermines this goal in part. Tax would be more effective by targeting business and corporations who are profiteering in NZ. 

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The problem with taxing profiteering is that you need it to continue to have a revenue base. This is the same for a CGT (endless asset price inflation) and I think part of the conversation that we need to have is "do we actually want these things in the first place?".

In the event the music stops (and we've seen it can, very suddenly) the state could be left with no revenue and have to find that elsewhere - so it becomes hugely likely you end up with the same taxes we have now on income and whatever shiny new taxes people dream up to fund whatever they like, rather than have to make a difficult choice about what is and isn't reasonable in a high cost-of-living economy in a low-wealth country. 

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Robbing tomorrow to finance today.

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No tax on the super fund.

And. And.  No tax or subsidy on Kiwisaver.  EEE.  

Both are not ordinary investments.  They are unique social instruments.

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The NZ Superannuation Fund and KiwiSaver are not equivalents.
There ought to be no tax on the NZSF, and contributions to it greatly increased from capital gains tax, inheritance tax, and gift tax, because the NZSF is a pot from which pensions will have to be paid in years ahead when over-65s may outnumber income-tax-paying workers.
KiwiSaver, in contrast, is simply a subdivision of PIE funds. As a pension tool it has been compromised by savers being allowed to withdraw funds early for a first-home deposit (and boost the housing ponzi), and also to withdraw funds early for economic hardship. Certainly the $521-a-year state subsidy to KiwiSaver funds should cease; and without that, they are simply PIE funds, and should be taxed as such.
If you want tax-exempt EEE superannuation funds, you need to establish something new that will be locked in till 65, then disbursed thereafter as an annuity. I doubt New Zealanders are ready for anything like that to become compulsory.

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"The NZ Superannuation Fund and KiwiSaver are not equivalents" - for once you're correct!

I'd agree with you that the tax on the Cullen Fund could be stopped, but only if future Government contributions are stopped; certainly not increased for the exact reasons you've given - it'd require an new tax and you want to prevent people like me accessing it after being forced to pay into it.  

Btw; Kiwisaver schemes do pay tax.  It's mischievous or plain ignorance to suggest otherwise.  

 

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I have little doubt that at some point, NZ will have to move to the Australian model-means-testing Superannuation-as the financial pressures of an ageing population keep growing.

I have lived here for 21 years now and it's home. I have enjoyed life here and am fortunate to be financially comfortable- sufficiently comfortable to be able to pay a six-figure sum for my unfunded cancer drugs-but on so many measures, I see the country going backwards. Yesterday, as a volunteer driver for the local Hospice, I took an Indian family to the hospital. The daughter told me that one of her mother's drugs-unfunded here-is funded in India. Her sister, a trained teacher, has already moved to Melbourne and several of her friends have also left.

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Mrs Holes & Sausages needs to focus on the dead, Stagflated economy. Its passed the point of no return. Its dead.

It needs a capital Bazooka injection from either a number of offshore investors or another $100b all in Bazooka. 

The Banana Republic has run out of Bananas. 

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