The government will soon be giving all KiwiSaver members a free top-up (called an MTC or Member Tax Credit) of $521.43 if you have contributed $1,042.86 or more towards your KiwiSaver in the 12 months from 1 July 2019 to 30 June 2020.
If you’re a PAYE employee earning $35k+, contributing the minimum 3% and your employer is doing the same, you’ll see this nice top up from the government in the coming months.
Being self-employed means building into your budget the voluntary contributions needed to meet that $1,042.86 figure before 20 June 2020. That will ensure you get your $521.43 MTC.
A law change, happening in 2021, is for the default KiwiSaver funds to be Balanced Funds instead of the much lower risk Conservative Funds. This is both good and troubling.
It’s good because if you get signed up to KiwiSaver and do nothing about it, given how the Balanced Funds are allocated, there may be a better return over time. However, a Balanced Fund can also be troublesome in volatile times as it introduces more risk. This can be especially troublesome if you’re relying on your KiwiSaver for a specific dollar amount for purchasing your first home.
This all underscores the need to have that all-important conversation around a good set up with the right fund/s, the right tax rate and the right budgeting strategy.